'Why People Vote for Those Who Work Against Their Best Interests'
Mark Blyth
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10/11/2017
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Are there a higher set of drivers in the global economy than we commonly pay attention to? Is the election of Donald Trump really just one part of a much larger, global pattern of events that is still unfolding and will affect us for years to come? Mark Blyth, the political economist noted for predicting both Brexit and the election of Donald Trump, walks you through the disparate dynamics in both the U.S. and Europe that will forever alter politics as usual and send shockwaves through the global economy. Dr. Blyth also tells you what this shift of power means to financial markets, the fate of the EU, and the political and economic climate in the U.S. His straight-talking, no-holds-barred and frequently entertaining analysis tells it like it is, with powerful predictions of what’s to come.
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- [00:00:00.633](gentle instrumental music)
- [00:00:07.974]VOICEOVER: Today, you are part of an important
- [00:00:09.709]conversation about our shared future.
- [00:00:12.145]The E.N. Thompson Forum on World Issues
- [00:00:14.914]explores a diversity of viewpoints
- [00:00:16.950]on international and public policy issues
- [00:00:19.519]to promote understanding, and encourage
- [00:00:21.921]debate across the University, and the state of Nebraska.
- [00:00:25.892]Since its inception, in 1988, hundreds of
- [00:00:29.229]distinguished speakers have challenged, and inspired us,
- [00:00:32.899]making this forum one of the preeminent
- [00:00:36.069]speaker series in higher education.
- [00:00:40.106]It all started when E.N. "Jack" Thompson
- [00:00:43.510]imagined a forum on global issues
- [00:00:45.678]that would increase Nebraskans' understanding
- [00:00:48.148]of cultures, and events from around the world.
- [00:00:51.418]Jack's perspective was influenced by his travels,
- [00:00:54.587]his role in helping to found the United Nations,
- [00:00:57.257]and his work at the Carnegie Endowment for
- [00:01:00.293]International Peace.
- [00:01:02.462]As President of the Cooper Foundation in Lincoln,
- [00:01:05.665]Jack pledged substantial funding to the forum.
- [00:01:08.968]And the University of Nebraska, and Lied
- [00:01:11.704]Center for Performing Arts agreed to co-sponsor.
- [00:01:15.241]Later, Jack and his wife, Katie, created
- [00:01:17.844]the Thompson Family Fund, to support the forum
- [00:01:21.047]and all their programs.
- [00:01:23.249]Today, major support is provided by
- [00:01:26.519]the Cooper Foundation, Lied Center for Performing Arts,
- [00:01:30.356]and University of Nebraska Lincoln.
- [00:01:33.493]We hope these talks sparks an exciting
- [00:01:35.895]conversation among you.
- [00:01:37.730](upbeat instrumental music)
- [00:01:40.300]And now, on with the show.
- [00:01:44.971](audience applauds)
- [00:01:51.044]MIKE ZELLANY: Good evening, ladies and gentlemen.
- [00:01:52.545]I'm Mike Zellany with the University
- [00:01:54.380]and it's my honor to welcome you
- [00:01:55.715]to a new season of the E.N. Thompson forum
- [00:01:57.917]on world issues, for nearly three decades
- [00:02:00.086]the University and the Cooper Foundation
- [00:02:01.688]have partnered with the Lied Center for Performing
- [00:02:03.556]Arts to make this forum possible.
- [00:02:05.792]Tonight our speaker is an internationally renowned
- [00:02:07.727]author, professor, and expert on global politics
- [00:02:10.763]and economics, Dr. Mark Blyth currently serves
- [00:02:14.033]as Eastman Professor of Political Economy
- [00:02:16.569]at Brown University, his research
- [00:02:18.671]focuses on the causes of stability
- [00:02:20.373]and change in the economy and why
- [00:02:22.775]people continue to believe certain
- [00:02:24.711]economic ideas despite evidence to the contrary.
- [00:02:28.715]Professor Blyth earned a Ph.D. in political
- [00:02:30.350]science from Columbia University
- [00:02:32.318]and the common theme of his research has been
- [00:02:34.354]how macroeconomic knowledge is used in politics.
- [00:02:37.724]Dr. Blyth's internationally acclaimed books
- [00:02:40.560]have been translated into 14 languages.
- [00:02:42.662]They include The Future of the Euro,
- [00:02:44.964]Austerity: The History of a Dangerous Idea,
- [00:02:47.967]and Great Transformations: Economic Ideas
- [00:02:50.503]and Institutional Change in the 20th Century.
- [00:02:53.706]Dr. Blyth is a regular contributor to the
- [00:02:55.275]journal of the Council of Foreign Relations,
- [00:02:58.144]Foreign Affairs, and the Guardian newspapers.
- [00:03:00.980]He's appeared multiple times on NPR, BBC,
- [00:03:02.615]and Bloomberg. Tonight after his remarks,
- [00:03:06.586]you will have the opportunity to ask Mark
- [00:03:08.221]questions via Twitter using the hashtag
- [00:03:09.923]E.N. Thompson forum, also ushers will be in the aisles
- [00:03:14.360]to collect your written questions
- [00:03:15.662]and bring them to the stage. The title of tonight's
- [00:03:18.131]presentation is Why People Vote for Those
- [00:03:21.134]Who Work Against Their Best Interests,
- [00:03:23.503]please join me in a warm Thompson Forum welcome
- [00:03:25.371]for Mark Blyth.
- [00:03:26.205](applause)
- [00:03:31.844]MARK BLYTH: Thank you.
- [00:03:31.044](applause)
- [00:03:40.320]Wow, can you hear me, everyone?
- [00:03:43.890]Can you hear me, yes, you hear me?
- [00:03:45.992]Alright good, because I can't see you,
- [00:03:47.527]I can't see a damned thing.
- [00:03:50.463]Wow there's a lot of people here, is Netflix broken?
- [00:03:53.933]I mean really, I mean what is it, a Tuesday?
- [00:03:56.836]Thank you, thanks for coming, it's brilliant.
- [00:03:58.972]Alright, I can't see you which is very disconcerting
- [00:04:01.274]but I suppose it's good in some ways.
- [00:04:04.143]Let's get started, first of all,
- [00:04:05.878]I'm Scottish, so you might have a problem
- [00:04:09.716]with the way I sound, for those of you
- [00:04:12.085]who are going why does that guy sound funny,
- [00:04:14.387]let me explain this, have you ever seen the film
- [00:04:16.022]Shrek, right, so after 27 years in the United States
- [00:04:20.593]I have exactly the same voice as Shrek.
- [00:04:23.596]I will prove this to you now, Donkey!
- [00:04:28.134]So, if at any point you're sort of fiddling
- [00:04:30.203]out going what's that guy talking about,
- [00:04:31.938]just think Shrek and it will all come back in,
- [00:04:34.941]alright, second thing is I have a bit of a cough,
- [00:04:37.443]so if I basically go down and cough up
- [00:04:39.278]a lung halfway through, it's normal, I'll be fine,
- [00:04:41.481]and then the third one is the title,
- [00:04:44.050]I didn't actually make this title up,
- [00:04:46.586]the Thompson Forum did, so when I was putting
- [00:04:49.288]the slides together, I went to the website
- [00:04:51.290]and said, oh, I didn't give them a title,
- [00:04:53.793]I wonder what, and I saw this and I thought,
- [00:04:55.528]ooh, I'm in trouble, see cause to get things started,
- [00:04:58.665]I actually don't believe that's true.
- [00:05:02.568]So let me explain what I mean by that,
- [00:05:04.704]I think it's incredibly patronizing
- [00:05:06.372]for anyone to tell someone else what they think
- [00:05:08.007]should be in their interest, so it's very
- [00:05:11.244]easy particularly for elites, however that word
- [00:05:14.514]is used and abused to say well it's in the best
- [00:05:17.216]interest of people to do this, or people
- [00:05:19.152]vote against their interest, that's like,
- [00:05:21.120]really, maybe they just see the world in a very
- [00:05:23.623]different way from you, maybe you don't like
- [00:05:25.258]the way they see the world, but they're
- [00:05:27.393]entitled to see the world that way,
- [00:05:29.962]and they will act upon it and the moment
- [00:05:31.597]you tell them they shouldn't do this,
- [00:05:33.299]they're probably gonna tell you, no,
- [00:05:35.334]that's what I'm gonna do, so I'm gonna use
- [00:05:37.336]the title as a provocation today and feed
- [00:05:40.306]into this and see where we go with it.
- [00:05:41.607]So you ready to play, alright let's go.
- [00:05:44.777]Let's see if I can figure out this,
- [00:05:45.878]looks like one of the, remember Star Trek,
- [00:05:48.981]it's like, I think this thing will come on,
- [00:05:53.519]yay there we go, alright, here's the thing,
- [00:05:56.322]so you may or may not know, I got Trump
- [00:05:59.192]six months out and I got Brexit three months
- [00:06:01.327]before that, because I pay attention
- [00:06:03.396]to what's called macroeconomic regimes,
- [00:06:05.865]boring title, I'll be there in a minute,
- [00:06:07.567]here's the thing, President Trump is a local event
- [00:06:10.269]and he's part of a global trend.
- [00:06:11.838]Brexit's the same thing, the German elections
- [00:06:14.006]just happened and reconfirmed the trend
- [00:06:15.908]despite the fact that the French National Front
- [00:06:17.844]didn't get elected, this has been 30 years in the making.
- [00:06:20.146]It's popular, everybody has a version
- [00:06:23.082]of this, whether it's the guy in the Philippines
- [00:06:25.218]that likes killing people that are on drugs,
- [00:06:27.386]whether it's the Japanese Prime Minister
- [00:06:29.522]who likes provoking things with Japan,
- [00:06:31.457]whether it's Trump telling us that NAFTA's dead
- [00:06:33.993]and tweeting various things, whether
- [00:06:35.828]it's Nicholas Sturgeon in Scotland,
- [00:06:37.663]saying she wants independence, she doesn't
- [00:06:39.532]want independence, she does want independence,
- [00:06:41.367]right, the Catalans in Spain could be up there,
- [00:06:43.302]right, this is kicking off everywhere.
- [00:06:45.671]In fact here's a little picture of some of the
- [00:06:47.140]most notable ones left and right.
- [00:06:49.142]Oddly the left wing ones are on the right,
- [00:06:51.711]the right wing ones are on the left
- [00:06:52.912]but bear with me, but as you can see
- [00:06:55.081]and this is very important, there's a huge
- [00:06:57.016]left wing phenomenon here, Jeremy Corbyn, Nichola,
- [00:06:59.385]we've got Dalinka, you have the Italian version
- [00:07:03.055]up there, Spain, and then Alex Tsipras in Greece,
- [00:07:05.358]as well as the more well known ones on the right,
- [00:07:08.795]cause we tend to think of populism as populism,
- [00:07:10.997]nationalism, anti-immigration, racism,
- [00:07:12.565]and that is totally partial, if you go
- [00:07:16.202]to Europe, three major country party systems,
- [00:07:19.038]all the political parties have been completely
- [00:07:21.440]transformed in the past ten years.
- [00:07:23.242]The Italians, the Greeks and the Spanish.
- [00:07:25.845]They will never be the same again,
- [00:07:26.979]and it's insurgents from the left rather than
- [00:07:29.182]the right that's actually transformed these places
- [00:07:31.284]and there's a left-wing version of this one
- [00:07:33.052]and there's a right-wing version of this
- [00:07:35.121]so I want to go through both.
- [00:07:36.956]Short version of how we got here.
- [00:07:38.457]Apparently if I walk this far I disappear
- [00:07:40.393]is that true?
- [00:07:42.361](audience laughing)
- [00:07:44.664]'Cause otherwise I have stand here
- [00:07:45.898]under these interrogation lights.
- [00:07:47.400](audience laughing)
- [00:07:48.568]There's a particular episode of Star Trek
- [00:07:50.069]where Jean-Luc Picard was tortured.
- [00:07:53.906]It's like this, like that, anyway
- [00:07:56.542]short version of how we got here.
- [00:07:59.145]Apparently they didn't tell you
- [00:08:00.213]I used to do stand up
- [00:08:01.180]and occasionally I just diverge into it.
- [00:08:02.849]So there we go.
- [00:08:05.718]So back in the day,
- [00:08:06.853]at the end of World War II,
- [00:08:07.854]from World War II,
- [00:08:08.855]from '45 to about '75
- [00:08:11.090]this is the golden era
- [00:08:13.092]and it was the period when something very weird happened.
- [00:08:15.628]It never happened before.
- [00:08:16.929]The top of the income distribution came down
- [00:08:19.031]the bottom went up
- [00:08:20.666]and the whole distribution jumped.
- [00:08:22.568]This is when you got the birth of
- [00:08:23.769]the American middle classes.
- [00:08:25.204]This is when British Prime Minister Harold Wilson
- [00:08:27.273]said to the working people in Britain,
- [00:08:30.276]you've never had it so good
- [00:08:31.677]and he was right.
- [00:08:32.712]And it was a unique combination of circumstances
- [00:08:33.712]that produced that world.
- [00:08:35.147]Mainly the reaction to the Great Depression,
- [00:08:36.948]fascism, World War II
- [00:08:38.417]and the success of the Soviet Union
- [00:08:40.753]and appealing as an alternate of economic model
- [00:08:41.754]after the chaos of the 20's and 30's.
- [00:08:45.458]So the end of that period
- [00:08:46.559]we built a world that looked like this.
- [00:08:47.860]The Cold War Era.
- [00:08:49.729]The policy target was full employment.
- [00:08:51.530]Regardless of whether you were Sweden or Spain
- [00:08:54.100]or the United States
- [00:08:55.134]that's what the government cared about
- [00:08:56.168]because we saw the disastrous consequences
- [00:08:58.337]of mass unemployment on a decade long period.
- [00:09:01.474]National economies, what that meant
- [00:09:03.643]was that capital was sealed off.
- [00:09:05.745]There was no international banking running around.
- [00:09:08.447]There was no derivative trades. There's no mortgage
- [00:09:10.616]backed securities. There was silo banking.
- [00:09:13.519]Commercial banks, savings and loans,
- [00:09:15.488]investment banks, they all did discrete things
- [00:09:17.723]and it was all about forcing investment at home.
- [00:09:20.760]You had highly distracted financial markets.
- [00:09:22.862]You had big organized labor dealing with big business
- [00:09:25.798]in big production units.
- [00:09:28.034]You had cost of living adjustment contracts.
- [00:09:30.303]All of that made possible, a high rate of investment
- [00:09:32.538]which led to a high rate of growth
- [00:09:34.407]which led to high rates of taxes and transfers.
- [00:09:37.076]Crucial bit of information. No one knew the name
- [00:09:39.912]of the person who ran the central bank.
- [00:09:41.981]Nobody.
- [00:09:44.283]Now jump forward to the era that I grew up in.
- [00:09:46.986]I left Britain in 1991 because of a woman.
- [00:09:50.089]Mrs. Thatcher
- [00:09:51.090]and
- [00:09:52.124](audience laughing)
- [00:09:54.660]and I jumped straight into the arms of Bill Clinton.
- [00:09:57.163]I don't think it was actually such a good idea.
- [00:09:59.432]But anyway,
- [00:10:01.334]we went to the neo liberal era and what did that mean?
- [00:10:03.369]We built a regime that was entirely different.
- [00:10:05.204]All these different economies, they're all very different
- [00:10:07.373]from each other, but they no longer cared about unemployment
- [00:10:09.909]because it had this inflationary crisis,
- [00:10:13.179]we'll get back to that in a minute.
- [00:10:14.380]What did we care about now?
- [00:10:15.381]Price stability.
- [00:10:16.916]And what do you care about?
- [00:10:17.917]Globalization. And what does globalization allow you to do?
- [00:10:20.720]Well you make stuff really cheaply. Well, yes 'cause
- [00:10:22.555]you have globalized your labor markets.
- [00:10:24.690]So the ability of labor to go on strike,
- [00:10:26.325]demand higher wages, done. It's over with.
- [00:10:29.295]Open financial markets. Why?
- [00:10:31.530]Because capital and technology flowing abroad
- [00:10:33.566]create those global supply chains
- [00:10:35.067]that make globalization possible.
- [00:10:37.536]So the only way you can cope at home
- [00:10:39.038]is get out of the unions and be more flexible.
- [00:10:41.674]We're a flexible labor market
- [00:10:43.075]and you got much lower taxes, much lower transfers
- [00:10:45.778]and here's the weird thing.
- [00:10:47.213]Everybody knows the name of the person who runs
- [00:10:49.048]the central bank.
- [00:10:50.916]Because they're now the most important person
- [00:10:52.318]in the country.
- [00:10:54.620]Two distinct regimes. Watch this.
- [00:10:56.122]That's US corporate profits going from 1960 down to 1992
- [00:11:02.094]and back up. Look at that.
- [00:11:03.863]I wonder what was squeezing them and what made them boom?
- [00:11:07.433]Here's another one.
- [00:11:09.001]US inflation. All the way up in the 1970's. Boom.
- [00:11:13.572]In 1980, Volcker jacks up interest rates.
- [00:11:16.609]The long decline in inflation.
- [00:11:19.045]And then what do you see treasury yields
- [00:11:21.247]a proxy for interest rates.
- [00:11:23.516]Up and up and up and up. Coping with inflation
- [00:11:25.618]and then down and down and down to where they are today.
- [00:11:29.889]Oops, back up. There we go.
- [00:11:31.624]So what killed that first regime was inflation.
- [00:11:34.060]Nixon vows inflation cut. There's the winter of discontent
- [00:11:37.029]and Britain with the unions were striking
- [00:11:39.398]and no one was even getting buried.
- [00:11:42.101]That was a tabloid story. What actually happened was
- [00:11:43.936]the ground was frozen so you couldn't bury anyone
- [00:11:46.005]but you could always blame the unions.
- [00:11:47.673]That's actually what happened.
- [00:11:49.175]And then as Ron Chernow claimed there
- [00:11:52.812]the great inflation destroyed faith in paper assets
- [00:11:55.214]'cause if you held the bond, suddenly the bond was worth
- [00:11:56.882]much less money than it was before.
- [00:11:58.784]But it was a brilliant time to be a debtor.
- [00:12:01.053]How many of you took out a mortgage in the 1970's?
- [00:12:04.790]Come on, put your hand up. You made out like bandits.
- [00:12:06.959]Because if you had a 3% mortgage and a 10% inflation,
- [00:12:10.362]it's great the bank was eating it and you were getting
- [00:12:12.631]the capital gain and then when you elected Reagan
- [00:12:15.167]you locked in higher interest rates and your house
- [00:12:17.803]increased value. What deal?
- [00:12:20.272]It's fantastic.
- [00:12:21.907]When it failed in the 70's
- [00:12:24.610]and the reason it failed was the following.
- [00:12:27.279]There was a system reset. Now here's the failure.
- [00:12:29.482]Imagine you've decided that I'm gonna target
- [00:12:31.550]full employment. And that's gonna be my one policy goal.
- [00:12:35.187]So you're gonna run a very tight restricted little set
- [00:12:38.023]of labor markets. And wages are gonna get bid up
- [00:12:40.159]to the point that by the time you get to the late 60's
- [00:12:43.028]when you're running the Vietnam War off the books
- [00:12:44.997]your real unemployment rate's about two and a half
- [00:12:47.800]to three percent. So, what happens in that point
- [00:12:51.103]is that the worst guy in your firm can leave work
- [00:12:54.106]and then walk straight into another job
- [00:12:55.875]and get a pay raise. The only way that firms can deal
- [00:12:59.345]with this is by pushing up prices.
- [00:13:01.347]So they push up prices then what happens?
- [00:13:03.215]Labor figures out they haven't really had a pay raise
- [00:13:05.618]so they want more money, so they get a pay raise
- [00:13:07.686]so they want more money,
- [00:13:08.721]and it all gets pushed up into inflation.
- [00:13:10.489]When inflation goes up and up and up like this
- [00:13:12.424]guess what happens?
- [00:13:13.826]It becomes irrational to be an investor.
- [00:13:16.228]So the investment rate collapses.
- [00:13:17.963]Unemployment goes up despite the inflation.
- [00:13:20.566]We get the great stag-flation of the 1970's.
- [00:13:23.402]And what's the solution to stag-flation?
- [00:13:25.604]Hand policy to central bankers.
- [00:13:27.506]'Cause they're not elected
- [00:13:28.908]they can't be thrown out of office
- [00:13:30.176]and they can do the nasty.
- [00:13:32.044]They can jack up interest rates to 20%
- [00:13:34.180]when your inflation is 16%
- [00:13:36.015]cause a massive hemorrhaging of the economy,
- [00:13:38.250]construction of credit
- [00:13:39.785]and you get the big recessions that happened
- [00:13:41.420]in the early 1980's.
- [00:13:43.189]But it really reset the system.
- [00:13:45.324]'Cause there was a new software written onto that hardware
- [00:13:47.693]if you want to use that analogy
- [00:13:49.161]and that was the ideas of Thatcher and Reagan
- [00:13:51.730]and the people behind them.
- [00:13:52.998]The open markets price stability, going global,
- [00:13:56.068]that was the way you do it.
- [00:13:57.770]The flexibility was good, the labor was bad.
- [00:14:00.072]That the returns to capital had to go up
- [00:14:02.007]otherwise what's the point in running capitalism?
- [00:14:04.276]That was the neo liberal compact.
- [00:14:07.680]Now, in 2008 that regime blew up.
- [00:14:10.115]And if you have a look at this slide what it shows you
- [00:14:12.818]is percentage of GDP as bank assets
- [00:14:15.854]in a selection of countries.
- [00:14:17.756]So let's have a look at Iceland.
- [00:14:19.692]Well that's good. That's about 800% of GDP in bank assets.
- [00:14:24.830]Let's remember what a bank asset is folk.
- [00:14:27.399]Banks call these things assets normal people call them debt.
- [00:14:31.103](audience laughing)
- [00:14:32.438]Right?
- [00:14:33.572]So I'll sit and explain this one, right?
- [00:14:35.641]So I have a condo in Boston which is nice.
- [00:14:38.010]And I have a mortgage on the other end of that.
- [00:14:40.512]Now the condo is my asset and it's the bank's liability
- [00:14:44.116]'cause they don't want a condo. They want the money. Right?
- [00:14:47.953]Now on the other end of that trade is a bank
- [00:14:50.022]and the bank looks at it and says
- [00:14:51.290]I have an asset. It's called Mark Blyth.
- [00:14:53.926]And I'm like wow, you've chosen poorly.
- [00:14:56.161]But nonetheless, I really am their asset
- [00:14:58.030]it's not the condo. They care about the income stream
- [00:15:00.065]and assets and liabilities sum to zero.
- [00:15:03.068]So if you've got a bank that has in this case
- [00:15:06.272]623% of the economy's total value out there in loans
- [00:15:12.111]do you think that might be slightly risky?
- [00:15:15.080]Ay.
- [00:15:16.148]And everybody was at that.
- [00:15:17.783]Even those conservative Germans.
- [00:15:19.752]86% of German GDP in one bank called Deutsche Bank
- [00:15:24.290]which lent an average leverage, right?
- [00:15:27.593]Assets to liability of 60 to one on an average Tuesday.
- [00:15:31.730]That's stable. All right, that's great.
- [00:15:34.300]Now why did we get like this?
- [00:15:35.668]'Cause remember that inflation rate that's very high?
- [00:15:38.304]You kill it with high rate interest rates.
- [00:15:39.838]But then you've got a problem because
- [00:15:41.507]you liberalize finance when the 16, 15% interest.
- [00:15:44.977]Oh my god it's so easy to make money.
- [00:15:48.147]I mean I get 15% just for showing up at Citi Bank
- [00:15:51.317]and opening a check account?
- [00:15:52.584]That's incredible. But a bonanza for savers.
- [00:15:55.120]This is awesome.
- [00:15:56.622]So anybody can do this. Remember Wall Street the movie?
- [00:15:59.892]Right?
- [00:16:01.460]Now here's the problem.
- [00:16:02.661]Those interest rates go down over time
- [00:16:04.463]'cause you make more and more financial transactions,
- [00:16:06.965]you integrate different markets, you open up globally
- [00:16:09.568]so the pool of money gets bigger.
- [00:16:12.071]As the pool of money gets bigger, what happens to the
- [00:16:13.806]price of money? It falls.
- [00:16:16.041]What's the price of money? The interest rate.
- [00:16:18.677]So how do you make money on a declining spread?
- [00:16:21.080]You pump up the leverage.
- [00:16:24.216]You do this.
- [00:16:25.651]And the banking system of the west became multiples
- [00:16:28.587]of the size of the underlying economy.
- [00:16:31.023]And it was all working great so long as everyone
- [00:16:32.991]was revolving credit. Whether it was your credit card,
- [00:16:36.261]your house, your mortgage loan, your car loan book,
- [00:16:38.664]whatever it was. So long as it doesn't go bust.
- [00:16:41.967]But remember, we've abolished the business cycle.
- [00:16:45.037]Everything's fine. We know what we're doing.
- [00:16:49.108]Then it all blew up. And at that point in time,
- [00:16:51.810]remember how I said the central bankers run the world?
- [00:16:54.046]Here's why. They bailed the system.
- [00:16:57.116]In the 1970's the system failed. Had a heart attack
- [00:17:00.052]because of inflation. The neo liberals came along
- [00:17:02.554]and reset the system. They wrote new software
- [00:17:04.490]for the hardware.
- [00:17:06.125]We didn't do that in 2008. We let the money doctors
- [00:17:08.627]come in and what they did was they pumped
- [00:17:10.462]13 trillion of euros, dollars and yen into the
- [00:17:14.199]global banking system to keep the system going.
- [00:17:17.603]It had a heart attack and we basically put them in
- [00:17:19.738]intensive care for 10 years.
- [00:17:21.573]This is the Federal Reserve's balance sheet.
- [00:17:24.209]That's all assets that they have bought from the
- [00:17:26.211]private sector and swapped it out for money
- [00:17:28.380]so that the private sector super cheap loans.
- [00:17:31.216]You know what they do with that?
- [00:17:32.684]Apple sits on the largest pile of cash of any corporate
- [00:17:35.421]in the world. I think it's about a quarter of a trillion
- [00:17:37.089]dollars.
- [00:17:39.291]Rather than using that, they borrowed money
- [00:17:41.794]'cause it was so cheap, issued their own bonds
- [00:17:44.430]which earns them a premium on top of that,
- [00:17:46.932]took the cash from that and then bought their own
- [00:17:49.168]shares back to boost the value of their stock
- [00:17:51.737]so they could reward themselves even more money.
- [00:17:55.073]And we book that as investment so they don't pay any taxes.
- [00:17:58.510]Does anyone else wanna call that bulls**t?
- [00:18:00.379](Audience laughing)
- [00:18:02.147](clapping)
- [00:18:04.416]The euro system is no different.
- [00:18:06.051]In fact they're in much deeper.
- [00:18:08.320]So, let's bring all this back to populism.
- [00:18:10.522]Do you think there might be a connection?
- [00:18:12.991]Let's figure this out.
- [00:18:14.726]So you can't really see this because I made it all up.
- [00:18:17.396]No, you can't really see this because it's very small
- [00:18:18.831]unfortunately. But let me try and explain what's up here.
- [00:18:21.900]Percent price changes in consumer goods and services
- [00:18:25.070]in the US from '97 to 2017.
- [00:18:27.806]So over a 20 year period, right, what costs more?
- [00:18:31.743]You know what's at the top of that?
- [00:18:33.212]College education.
- [00:18:35.414]You know what the next one is?
- [00:18:36.748]Health care.
- [00:18:38.016]You know what the next one is?
- [00:18:39.184]Child care.
- [00:18:40.819]You know what's at the bottom?
- [00:18:42.488]iPods.
- [00:18:43.589](Audience laughing)
- [00:18:44.723]You can't eat an iPod and if you can't afford to
- [00:18:46.725]go to college, what are you gonna do apart from
- [00:18:48.594]sit at home and play games with it?
- [00:18:52.731]Here's the global story on incomes.
- [00:18:54.433]This is called the elephant graph for obvious reasons.
- [00:18:57.236]So what it shows here is the real increase in incomes
- [00:19:01.373]from the poorest person in the world, literally
- [00:19:04.309]to the richest.
- [00:19:05.577]And if you do this by country,
- [00:19:07.446]what those dots represent are different countries
- [00:19:09.448]is you see that basically the countries of eastern
- [00:19:11.817]South Asia have had the largest gains.
- [00:19:14.219]If you go up to the 45th percentile, that's China.
- [00:19:16.822]They've been doing quite well. Why?
- [00:19:18.657]'Cause they came from here, we were there
- [00:19:19.825]and it's went like that.
- [00:19:21.793]Now, when you get to the 67th percentile
- [00:19:24.229]you get to the poorest person in the United States,
- [00:19:26.565]notice all those incomes have been falling relative
- [00:19:29.668]to where they've been growing.
- [00:19:31.303]In fact at the bottom of the distribution
- [00:19:33.572]at 78% to 87%, the American Middle Classes,
- [00:19:38.043]you've taken a real hit.
- [00:19:40.245]And then guess what? There's been fantastic gains.
- [00:19:42.915]That's your 1% in the trunk.
- [00:19:47.252]Now who gets this if you break out for the US?
- [00:19:49.721]This is quintiles, 20%, 40%, 60%. Guess what?
- [00:19:54.126]The top 20% have made off with all the cash.
- [00:19:57.796]And then everybody else's went uhhhhh
- [00:20:00.265]and if you're actually in the bottom uhhhhh.
- [00:20:02.601]Look it's hardly budged since 1980.
- [00:20:05.137]And that's true for the bottom three quintiles.
- [00:20:07.873]So 60% of the country hasn't really had a pay raise
- [00:20:11.243]when you adjust for inflation since 1980.
- [00:20:14.780]Meanwhile like me on the coasts, we've been
- [00:20:17.182]lapping it up. I've been having lobster thermidor
- [00:20:19.318]in the bath.
- [00:20:20.619](audience laughing)
- [00:20:22.187]Don't tell my wife. She hates when I do that.
- [00:20:24.156]Here's a clue to where this broke.
- [00:20:27.292]Remember that first regime I was talking about?
- [00:20:30.896]Full employment, captive labor markets, blah blah blah
- [00:20:33.799]the rest of it. Look, what have you got?
- [00:20:35.434]1948 right through 1973. Productivity and hourly
- [00:20:39.171]compensation track each other completely.
- [00:20:41.473]Kohler contracts. Labor's big enough to hurt business
- [00:20:44.810]business big enough to hurt labor.
- [00:20:46.612]You cooperate.
- [00:20:47.613]Because you have to constantly pay labor more,
- [00:20:49.748]business is forced to innovate.
- [00:20:51.984]That's how you maintain your margins.
- [00:20:53.785]Until the system self destructs with inflation
- [00:20:55.954]'cause no amount of innovation is gonna get you around that.
- [00:20:58.724]It's a structural problem. So you go for the
- [00:21:00.626]disinflation solution. You start to globalize your
- [00:21:02.828]production, you build in the industrialization that's
- [00:21:05.197]been going on from the 70's the move from here to the south,
- [00:21:08.200]what do you find?
- [00:21:09.201]Hourly compensation starts to lag.
- [00:21:11.370]Productivity continues.
- [00:21:12.904]What's in the gap?
- [00:21:14.039]That's your one percent trunk.
- [00:21:18.310]Here's the quintile wage growth. Again the 20%'s
- [00:21:21.346]the wage quintile. What's actually changed?
- [00:21:23.281]Hourly wages. Who's been making out?
- [00:21:25.384]Again the top and the upper middle.
- [00:21:27.285]The middle's barely budged. The bottom two,
- [00:21:29.187]you can't even talk about, the bottom has fallen
- [00:21:31.423]in real terms.
- [00:21:34.292]Labor share of income.
- [00:21:36.261]Used to be in the 70's we never had it so good.
- [00:21:39.498]That's because capital share of income was low
- [00:21:41.767]and labor share of income was at an all time high.
- [00:21:44.202]Since then, look what's happened.
- [00:21:46.038]Down and down and down.
- [00:21:48.473]Now this creates a big problem at the end of the day
- [00:21:50.575]because I like Mitt Romney but there's only so many
- [00:21:52.644]fridges he can buy.
- [00:21:55.747]And you do have a basic consumption problem
- [00:21:57.382]if you've been running your economy as we have
- [00:21:59.217]for the past 30 years off of credit.
- [00:22:01.486]And if people's wages aren't rising
- [00:22:03.689]and they're strapped with too much debt
- [00:22:05.924]which banks call credit, remember that little trick?
- [00:22:08.326]Assets and liabilities. Then they can't service
- [00:22:11.329]their debt. If at the same time they're being told
- [00:22:12.964]if you don't go to college, you'll never amount to anything.
- [00:22:15.400]There's no jobs for anyone who doesn't have a college degree
- [00:22:16.968]these days.
- [00:22:18.336]I wish I knew what a college degree qualified most people
- [00:22:19.871]would do by the way but we'll put that to the side
- [00:22:21.506]for the moment.
- [00:22:22.874]What is it you end up with?
- [00:22:24.443]You end up with a world in which your share
- [00:22:26.278]of the national product is falling despite the fact
- [00:22:29.147]that the country has never been richer.
- [00:22:31.616]And it's not just this country.
- [00:22:33.051]It's every country. I'm gonna take you to Germany
- [00:22:34.786]at the end of this and show you the story's just the same.
- [00:22:39.157]This is the zip code distress map.
- [00:22:42.127]What you see there are the blue areas on the left hand side
- [00:22:45.063]are prosperous communities. The orange are at risk.
- [00:22:49.201]The red one are distressed. High unemployment,
- [00:22:51.670]obesity, murder rate, opioid addiction. All of the bads
- [00:22:55.907]are the red bits.
- [00:22:57.943]There's the electoral map.
- [00:23:01.279]It's not a perfect fit because one's zip codes
- [00:23:03.148]and the other one are districts.
- [00:23:05.083]But it does tell you a story. It might suggest
- [00:23:07.486]that people who are living in distressed communities
- [00:23:10.822]don't actually think when politicians show up and say
- [00:23:13.525]vote for me jobs, vote for me change
- [00:23:16.261]and their community just stagnates and gets worse
- [00:23:18.730]that they don't actually update the information
- [00:23:20.966]and maybe figure that these people are just
- [00:23:22.300]professional liars.
- [00:23:24.636]And then when someone comes along and calls bulls**t on them
- [00:23:26.972]they go, I may not like this guy
- [00:23:28.774]but he's telling the truth.
- [00:23:33.445]So how did people survive when wages isn't growing?
- [00:23:36.615]They borrow.
- [00:23:38.316]This little graph shows you bank assets,
- [00:23:40.552]your liabilities, your debts, their income,
- [00:23:44.389]since 1970. Bank loans to GDP. Boom.
- [00:23:48.426]Off the scale.
- [00:23:51.363]Now, this is my favorite advert from the lunacy
- [00:23:53.665]that was the early 2000's. Citi Bank had an
- [00:23:56.935]advertising campaign. Cost them 100 million dollars.
- [00:24:00.505]They spent that on advertising. And they're a crap bank.
- [00:24:03.842](audience laughing)
- [00:24:06.812]And they are a crap bank but anyway.
- [00:24:09.114]They had this whole advertisement.
- [00:24:10.515]This is an example of it. Open a cravings account, right?
- [00:24:13.819]This is from 2005 just before the bust.
- [00:24:16.354]Do you remember what the advertising slogan for
- [00:24:19.524]the whole campaign was?
- [00:24:20.625]Five bucks to anybody who knows this.
- [00:24:23.328]Live richly.
- [00:24:25.397]Remember this. Right.
- [00:24:26.932]Not save up and buy yourself something nice or
- [00:24:29.000]you might want to put something away
- [00:24:31.069]and use the power of compound interest.
- [00:24:32.971]No. Just live richly.
- [00:24:34.673]How can we do that? In 2004 I lived in Baltimore.
- [00:24:37.876]I went away for two weeks. I couldn't open the door
- [00:24:40.212]when I came home 'cause I had so many credit card offers.
- [00:24:42.948](audience laughing)
- [00:24:44.816]Out of control.
- [00:24:48.220]Now, that's where this goes. Remember that thing
- [00:24:50.055]about labors shares declining?
- [00:24:51.890]All the incomes go to top 20%. This is euro area
- [00:24:55.260]consumer credit. There's US consumer credit.
- [00:24:59.664]Look at the jump.
- [00:25:01.833]That's people borrowing to fill in that gap.
- [00:25:04.536]That's why the banking's so big.
- [00:25:06.905]Because every single one of us is running a deficit.
- [00:25:09.507]I'm 50 years old. For everybody who's 50 years old
- [00:25:12.344]or older, do you remember a time when you didn't have
- [00:25:14.946]credit cards?
- [00:25:16.715]Yes. Right.
- [00:25:18.183]For everybody who's under 50, that happened.
- [00:25:20.785](audience laughing)
- [00:25:23.321]We used to have this thing
- [00:25:24.356]called the state that run deficits for us
- [00:25:26.491]and paid for stuff.
- [00:25:28.627]But now you do it yourself through student loans,
- [00:25:32.097]through revolving lines of credit,
- [00:25:34.099]through borrowing from your houses if it's an ATM.
- [00:25:37.535]Because that's what you're using to fill in the gap.
- [00:25:39.571]'Cause the cost of college has gone up 150%
- [00:25:41.539]in real terms. Whereas your wages if you're in the
- [00:25:44.142]middle of the distribution have barely budged.
- [00:25:49.581]This is euro area wage growth 2008 - 2017.
- [00:25:53.118]Even the Europeans in their bigger wealthy estates
- [00:25:55.253]same trend. And there's the wage share of GDP again.
- [00:25:59.224]Same as we saw before. Labor share falling off.
- [00:26:02.994]So what happens when
- [00:26:03.828]you bail out that massively levered system
- [00:26:06.464]in 2008? When regime two has the heart attack
- [00:26:10.502]and the money doctors come in.
- [00:26:13.004]This is where all the debt came from.
- [00:26:15.340]It wasn't that we went on an orgy of spending.
- [00:26:17.976]That's where I got pissed off enough to write that book
- [00:26:19.844]Austerity: The History of a Dangerous Idea.
- [00:26:21.513]This was the greatest bait and switch
- [00:26:23.481]in human history folks.
- [00:26:25.483]What actually happened was the banking sectors of
- [00:26:27.285]all the advanced countries blew up.
- [00:26:29.788]And rather than them taking their losses,
- [00:26:31.256]they told the politicians oh my god,
- [00:26:33.558]there'll be no money in the ATM's.
- [00:26:34.893]Think what will happen. The whole world will die.
- [00:26:36.928]Maybe it's true, maybe it's not but like all good stories
- [00:26:39.497]it makes you afraid. So what do you do?
- [00:26:41.833]You open up the monetary tops and you bail all them out.
- [00:26:45.003]And you run large deficits which lead to more debt.
- [00:26:48.106]You recapitalize the financial institutions.
- [00:26:50.008]You do all the stuff that produces
- [00:26:52.043]and the amount gets a giant raise in the amount
- [00:26:55.547]of federal debt and the same in the EU
- [00:26:58.383]despite the fact that they're not even one country.
- [00:27:00.952]All the buying of those assets,
- [00:27:02.220]putting on the balance sheet,
- [00:27:03.455]handing them the cash, they then issue the bonds,
- [00:27:05.423]buy back their own share price
- [00:27:06.925]and we still don't have a pay raise.
- [00:27:08.827]It's called financial engineering.
- [00:27:12.297]13 trillion dollars in central bank interventions later.
- [00:27:14.866]Here's the funny thing. There's no inflation.
- [00:27:17.502]See the start of the crisis, the one big fear was
- [00:27:20.572]if the government steps in and starts spending all this money
- [00:27:23.875]it'll be like Germany in the 1920's.
- [00:27:26.211]There'll be this huge hyperinflation and it will be
- [00:27:28.380]terrible and inflation's been falling and falling
- [00:27:31.950]and falling and falling.
- [00:27:36.021]Here's why. Remember I mentioned the 1970's was
- [00:27:38.023]very important. It was that moment when the inflationary
- [00:27:40.759]crisis took hold and broke the post-war model
- [00:27:43.461]of capitalism.
- [00:27:45.663]Ooooooo. Did we get that wrong.
- [00:27:48.833]Here's my favorite graph in the world. You ready?
- [00:27:51.102]'Cause I've got a few but this one's a topper.
- [00:27:54.239](audience laughing)
- [00:27:58.410]I got this from a guy who smuggled it out of the
- [00:28:00.512]cabinet office of the Japanese Prime Minister.
- [00:28:03.081]It was fantastic, right?
- [00:28:04.649]That's why it's all in Japanese.
- [00:28:06.051]But what does it show you?
- [00:28:08.086]It shows you interest rates since 1350.
- [00:28:12.023]Now, when you get to, I know it's brilliant right?
- [00:28:14.059]When you get to the, stay with me, pay attention.
- [00:28:18.163](audience laughing)
- [00:28:20.131]I know it's fun but it's worth it. Now look.
- [00:28:22.200]Here's the thing. You all watch Game of Thrones, right?
- [00:28:25.036]So Game of Thrones. Hi I'm the king I'd like to
- [00:28:27.572]borrow some money. I'm the bank of Braavos.
- [00:28:30.208]You know what happened?
- [00:28:31.242](squishing noise)
- [00:28:32.243]Everybody dies. So, in that world,
- [00:28:33.878]you have very high real interest rates
- [00:28:36.014]because if you get a bond from a government
- [00:28:37.849]they might rip you off.
- [00:28:39.651]There's no secondary market where you buy and swap
- [00:28:41.719]different bonds around to offset the risk.
- [00:28:44.889]So you have very high real interest rates.
- [00:28:46.791]The Italians and the Dutch come along in the 15th, 16th
- [00:28:49.260]century and invent a secondary market for government debt.
- [00:28:52.163]That starts to grow rapidly.
- [00:28:53.832]The risk dissipates and then by the time you get to the
- [00:28:56.768]1700's, real interest rates are below four percent.
- [00:29:00.038]The Brits can issue a perpetual bond, a forever bond
- [00:29:03.074]to fight in the Napoleonic wars at three percent
- [00:29:05.076]and its oversubscribed.
- [00:29:06.744]By the time you get to 1941, the real rate of interest
- [00:29:10.281]is 1.88. So the long run real rate of interest for
- [00:29:14.619]the global economy is two percent.
- [00:29:17.055]Then there's the 70's.
- [00:29:19.057]All the inflation is in the 70's 'cause of the one
- [00:29:21.392]unique confluence of events that was that post-war
- [00:29:23.394]regime and its breakdown.
- [00:29:25.296]But all of the economics we've ever learned
- [00:29:27.365]is based upon the experience of that one bit of
- [00:29:29.934]the time series. Every thing else is forgotten.
- [00:29:33.605]Here's why this is important.
- [00:29:37.342]That's the federal funds rate. Forget the financial crisis.
- [00:29:40.311]Where's that been going?
- [00:29:42.380]Down and down and down.
- [00:29:44.849]Here's the four big central banks in the world.
- [00:29:47.552]Down and down and down.
- [00:29:49.988]1980's inflationary crisis all the way down.
- [00:29:53.892]Banks build up leverage on the way up. Pop.
- [00:29:56.861]Interest rates are still down.
- [00:29:58.229]There's no inflation in the system. Why?
- [00:29:59.998]'Cause it's labor that produces inflation.
- [00:30:02.200]And once you've globalized your labor markets
- [00:30:03.935]there's no inflation there anymore.
- [00:30:06.104]Why can't Johnny E. Ellen bring interest rates up?
- [00:30:08.273]Why can't Draghi interest rates going up?
- [00:30:09.841]'Cause there's no reason to. There's no inflation.
- [00:30:11.976]Why would you do it? You'd simply slow down the economy.
- [00:30:14.312]But what does that mean for savers?
- [00:30:16.014]What does that mean for pension funds?
- [00:30:18.216]Whoops.
- [00:30:21.452]Now add this all together and in my opinion,
- [00:30:23.154]and you get populism. Debts are too high,
- [00:30:26.057]wages are too low to pay off the debt
- [00:30:27.692]inflation's too low to eat the debt.
- [00:30:29.561]You can't play the trick you did in the 70's
- [00:30:30.828]when you got a mortgage.
- [00:30:32.463]It's the other way around. This is a creditor's paradise
- [00:30:34.999]not a debtor's paradise.
- [00:30:36.968]The left response is blame capital and blame globalization
- [00:30:41.306]and they're not blameless. The right response
- [00:30:43.141]blame immigration blame globalization.
- [00:30:46.077]Mmmmmmm, we can disagree on the immigrants one
- [00:30:47.946]but they're basically hitting on the same thing.
- [00:30:50.515]Now, the results of this are creditor debtor standoffs
- [00:30:54.586]gun fights if you will
- [00:30:56.688]at the level of states, at the level of localities,
- [00:30:59.357]at the level of communities.
- [00:31:01.159]What you have is a situation now
- [00:31:02.994]where there's no inflation. Interest rates are really low
- [00:31:04.762]where your debts are stable.
- [00:31:06.598]But it's very hard to service them.
- [00:31:09.100]And all the laws are being written to the advantage
- [00:31:10.635]of creditors now.
- [00:31:12.070]You can't declare personal bankruptcy on student loans,
- [00:31:13.638]et cetera, et cetera.
- [00:31:15.039]So what do you have? The real value of debt goes up
- [00:31:16.874]but your ability to collect goes down.
- [00:31:19.677]What does that do? Who are the losers?
- [00:31:21.813]The pro-globalization left parties of the 1990's
- [00:31:25.216]the German social democrats, new labor Clinton's version
- [00:31:27.552]of the Democrats
- [00:31:28.920](blowing up noise)
- [00:31:30.088]credibility is gone.
- [00:31:31.456]They're dead. Who are seen as the new stars?
- [00:31:33.558]All of this lot. Bernie, Podemos, Five Star.
- [00:31:36.327]Who's on the other side of this?
- [00:31:38.529]Debtors.
- [00:31:39.998]The winners in the most perverse sense.
- [00:31:42.200]Can't pay, won't pay, to hell with you.
- [00:31:44.802]That's your Trump voters.
- [00:31:46.237]That's your Le Pen voters.
- [00:31:48.740]It's also the left of wars. It's just expressed
- [00:31:50.942]in a different way.
- [00:31:52.910]People who've seen this system systematically not work
- [00:31:55.013]for them and what do you get there?
- [00:31:57.181]That's when it's coated through nationalism
- [00:31:58.916]and clothed against immigrant,
- [00:32:00.551]AfD, the Finns, Fidez, Law and Justice,
- [00:32:02.520]all the right wing versions.
- [00:32:04.489]Back to that one slide.
- [00:32:06.691]Both sides.
- [00:32:07.759]Same thing producing both.
- [00:32:09.260]Now, in closing a deeper dive into the German elections.
- [00:32:13.264]For a while it seemed it was all going so well.
- [00:32:16.668](audience laughing)
- [00:32:18.336]We'd got rid of the populists.
- [00:32:20.104]Europe was growing.
- [00:32:21.472]I mean I love, what politician in their right mind
- [00:32:24.108]gets that picture taken and doesn't think
- [00:32:26.644]James Bond bad guy?
- [00:32:28.613](audience laughing)
- [00:32:29.881]Right? It's just perfect.
- [00:32:31.349]And Maureen's on the other side they were like
- [00:32:33.217]immigrants, the door is over there.
- [00:32:35.086]You know just go away please.
- [00:32:36.788]So anyway, they got turfed so it was like it was good.
- [00:32:40.358]It was all fine. People in Brussels are very happy, right?
- [00:32:42.727]And then this happened.
- [00:32:44.595]The economy was going well.
- [00:32:47.131]So obviously people were going to vote in their interest.
- [00:32:50.034]We don't have to worry about the German elections.
- [00:32:52.103]It's fine. Look. Here's our GDP. It's going up. Finally.
- [00:32:54.906]You notice they always put forecast in there
- [00:32:56.541]in small print.
- [00:32:58.343]And then here's unemployment going down. Forecast, right?
- [00:33:01.012]But things are moving in the right way.
- [00:33:02.547]Just in the same way that the Democrats simply
- [00:33:05.116]didn't get it. That when they were wandering around America
- [00:33:07.652]in the campaign, telling everyone that things
- [00:33:10.288]have never been so good.
- [00:33:11.589]That unemployment's back to where it was before the crisis.
- [00:33:14.359]That things are great.
- [00:33:16.427]For millions of Americans that were like
- [00:33:18.463]are you got rocks in your head?
- [00:33:20.431]Have you been to where I live?
- [00:33:22.433]All you need to do is, I'm live in Providence,
- [00:33:24.602]Rhode Island. Really, really wealthy little part
- [00:33:27.338]where the university is the east side.
- [00:33:28.906]I just need to drive two miles
- [00:33:30.875]and I can take my students to places where
- [00:33:33.044]there are pawn shops, some of the major businesses
- [00:33:37.348]are mobile shops that there's networks these students
- [00:33:41.219]have never heard of. Two completely different Americas.
- [00:33:43.888]All in the one city. You can bike from one side
- [00:33:45.990]to the other.
- [00:33:47.692]And yet, we think in averages. On average, wages
- [00:33:50.528]have gone up. On average unemployment's gone down.
- [00:33:53.698]We don't live on an average. It's all skewed.
- [00:33:56.100]It's all going to the top 20.
- [00:33:58.636]Now, they thought in Europe it was over.
- [00:34:00.671]Everything was heading in the right direction.
- [00:34:03.007]And then this happened. We're back.
- [00:34:05.042]So what you've got the black at the top there
- [00:34:07.512]is Merkel's party the coalition on the right.
- [00:34:10.114]33% is the worst they've done in recorded history.
- [00:34:14.851]The SPD, the helper up from the left,
- [00:34:17.922]the people who are meant to offer an alternative
- [00:34:20.658]but have been end of coalition basically pushing this
- [00:34:23.127]agenda along, they're down the worst result ever.
- [00:34:25.897]Have a look at the winners and losers on this one.
- [00:34:29.434]It's the two mainstream parties that have lost.
- [00:34:32.103]Who's up on the other side?
- [00:34:33.905]It's the alternatives. In this case it's the right ones.
- [00:34:37.041]Now here's the two faces of the German economy.
- [00:34:40.210]This is this whole story about everything's fine.
- [00:34:41.978]Why is everyone whining about it? It's not the economics.
- [00:34:43.648]So, here's real GDP per capita average growth rate
- [00:34:47.485]seven to 16, Germany outstripping everybody.
- [00:34:50.487]They sell BMWs to the rest of the world.
- [00:34:52.723]They're awesome. We buy them. It's that simple, right?
- [00:34:55.359]Here's declining unemployment, right?
- [00:34:57.495]Going down and down. This is 2016 - 17, down from 4.3
- [00:35:01.599]we'd kill for 4.3. We've got 4.3 but the way we calculate
- [00:35:05.503]unemployment is really weird.
- [00:35:07.104]And then they're down now to basically 3.7.
- [00:35:09.707]They've got over full employment.
- [00:35:11.075]They have a shortage of skilled workers.
- [00:35:13.644]So why is everyone complaining? Well, here's why.
- [00:35:16.113]This is poverty and development.
- [00:35:18.583]Have a look at that purple line. That's the poverty rate.
- [00:35:21.285]Now this came from two sources.
- [00:35:24.222]Number one buying East Germany. Basically 17 million
- [00:35:27.692]unemployed communists showed up and said get me a job.
- [00:35:30.027]You had to integrate them in your economy.
- [00:35:33.097]That costs a lot of money. And the land of the eastern land
- [00:35:35.900]of the ones where you still have the highest number of
- [00:35:38.369]people in poverty on social benefits, et cetera.
- [00:35:42.206]Now for the past ten years the German government
- [00:35:44.208]like everyone else has been saying
- [00:35:45.610]we need to tighten our belts.
- [00:35:46.777]We need to pay back our debt.
- [00:35:48.179]We need to cut back this welfare state.
- [00:35:49.680]We can't afford it anymore.
- [00:35:51.782]But at the same time, what are they doing?
- [00:35:53.150]They're opening their door to two million refugees.
- [00:35:56.721]So what does that look like to the people who are
- [00:35:58.022]the recipients sitting in the east who have seen
- [00:36:00.324]their industry stripped, their country destroyed
- [00:36:03.961]and their homes devalued?
- [00:36:05.963]While the rest of the west is doing fine
- [00:36:08.165]and now they're meant to accept a bunch of immigrants.
- [00:36:10.167]There seem to go all the welfare transfers.
- [00:36:12.503]How come I can't get my school renovated?
- [00:36:15.406]You can see how this one plays out.
- [00:36:19.944]This is the election results in east and west Berlin.
- [00:36:22.380]This is one city that used to be divided.
- [00:36:25.683]20 years ago the division is still there.
- [00:36:28.953]What you see in the west, Merkel's party 34%
- [00:36:32.189]in the east 27%.
- [00:36:33.491]AfD, the right wing upstarts the anti-immigration party
- [00:36:37.929]west Berlin 10.9. 21.6. That's in one city.
- [00:36:46.938]Identity politics do matter but all identity is
- [00:36:50.241]coded through economics. You can't explain a rise
- [00:36:53.477]in the number of racists by virtue of a rise of the number
- [00:36:55.546]of racists. You need to explain where it comes from.
- [00:36:57.248]And where it comes from in the German elections
- [00:36:59.584]which I think is very, very germane for thinking
- [00:37:01.752]about this problem in general is what is it unique
- [00:37:04.322]about this one area? Why is it that if you're in the east
- [00:37:06.757]you're far more likely to have a higher level
- [00:37:10.094]of xenophobia than the west
- [00:37:11.362]even when you control for age.
- [00:37:13.965]Well part of the fact is go back to the prior slide.
- [00:37:16.300]You live in the area that's deprived.
- [00:37:18.202]You live in the area that since 1991 has been under a
- [00:37:21.238]sea of transfers and now you feel you're in competition
- [00:37:24.241]for those transfers with a bunch of people
- [00:37:26.243]that have come into your country that you didn't invite.
- [00:37:28.913]Do you think populists can pick up on this?
- [00:37:31.515]And make this into a politics?
- [00:37:33.451]And if the center parties are unable to talk about it
- [00:37:36.053]unable to explain rationally why they should want
- [00:37:38.823]to make these choices, then the results inevitable.
- [00:37:41.792]And the tragedy in the German case
- [00:37:43.394]and this argument could be extended here and everywhere
- [00:37:45.630]is the following.
- [00:37:47.131]The west is old. The west is rich.
- [00:37:51.402]But you didn't have enough kids.
- [00:37:53.604]There are 1.4 new Germans for every two that are there
- [00:37:56.173]just now. Their economy's shrinking.
- [00:37:58.309]The whole of Europe is just below two in its
- [00:38:00.811]replacement rate.
- [00:38:02.413]So that means one of two things. Either,
- [00:38:04.749]if an economy is nothing more than a number of workers,
- [00:38:06.350]number of hours worked and the amount of capital
- [00:38:08.452]if you take out the number of workers
- [00:38:10.121]you have a shrinking pie.
- [00:38:11.656]Given that the pie is already skewed in its distribution
- [00:38:13.624]that's gonna get ugly.
- [00:38:15.826]So the solution would be immigrants.
- [00:38:17.962]Because they can come in, you can put their kids
- [00:38:20.564]in your system. You can tax them across the generations.
- [00:38:23.734]They pay for your debts. They pay for your old care.
- [00:38:26.537]They pay for your pensions.
- [00:38:28.372]Or you can do the stupidest thing ever.
- [00:38:30.107]You can say no to that and demand that you want more.
- [00:38:34.979]Which seems to be what people are doing.
- [00:38:38.382]Here's an interesting one.
- [00:38:40.217]This is contact with immigrants.
- [00:38:42.219]People in the west have far more contact with immigrants
- [00:38:45.756]than people in the east.
- [00:38:47.425]But in the east is where they voted for the AfD.
- [00:38:49.894]So how do you explain that?
- [00:38:52.263]'Cause it's not even contact with real people.
- [00:38:54.432]It's the imaginary that these people are taking things
- [00:38:57.168]from me.
- [00:38:58.569]That's a pure populist creation.
- [00:39:02.440]So why do people vote against those who work against
- [00:39:04.575]their best interests?
- [00:39:06.343]Well, it's not clear to me that's the case.
- [00:39:07.845]It's not clear that the populists are really the problem.
- [00:39:10.881]Even on the right. Or even on the left.
- [00:39:13.050]See this presumption that we had that the mainstream
- [00:39:15.286]parties were working for them. And it turned out
- [00:39:17.822]it wasn't true. I'll give you a little bit of anec data
- [00:39:20.624]from this and you can check it out.
- [00:39:22.793]In the Guardian newspaper Tom Frank wrote about this,
- [00:39:26.230]it's the most obvious site to get a link to it.
- [00:39:28.833]Here's the story. When they did the Podesta email hacks
- [00:39:32.303]when they got the Democrats' emails,
- [00:39:34.939]somebody took the data from wikileaks and decided
- [00:39:37.374]to what's called geolocate the data. In other words
- [00:39:41.078]what were the place names that the leading democrats
- [00:39:43.848]who are the left party who are meant to represent all of us
- [00:39:46.951]remember, not the elite republicans.
- [00:39:48.652]What were the place names that they talked about?
- [00:39:51.355]In their private communications in this election.
- [00:39:53.390]What was the number one most frequently named place
- [00:39:56.994]in their communications? Can you guess?
- [00:40:01.799]Have a guess.
- [00:40:03.167](audience randomly answering)
- [00:40:04.635]Martha.
- [00:40:06.337]Martha's Vineyard.
- [00:40:08.906]Yeah.
- [00:40:09.907]Number two east and south Hampton.
- [00:40:13.477]Then New York.
- [00:40:15.446]Then San Francisco.
- [00:40:17.815]Then I think it was LA and DC.
- [00:40:20.184]And the rest of the country.
- [00:40:22.419]Two standard deviations out.
- [00:40:25.222]So what's the imaginary?
- [00:40:27.691]Of a party that seeks to represent all?
- [00:40:30.194]If that's all the places that they talk about
- [00:40:31.729]'cause that's where the money is.
- [00:40:33.664]And it's not just to castigate the democrats.
- [00:40:35.566]The British labor party was like this under Blair.
- [00:40:38.202]The German SPD under Schlueter has done this.
- [00:40:39.703]The left has systematically failed the people
- [00:40:42.173]that it supposedly represents.
- [00:40:44.308]So why should we be at all least surprised
- [00:40:45.843]that they defect and then go to anyone at all
- [00:40:49.180]that actually says hey, I know that everyone's
- [00:40:51.615]ignored you for 25 years. I at least hear the fact
- [00:40:54.418]that you're crying and understand why.
- [00:40:58.189]People's every day experience is very different from a
- [00:41:00.424]national average. Walking out and telling people
- [00:41:03.327]that the price of iPods has fallen
- [00:41:04.962]which means that really they've got more money
- [00:41:07.164]than they think at a time when they can't afford
- [00:41:09.099]to send their kids to college
- [00:41:10.601]or their kids would be insane to take on that much debt
- [00:41:12.870]'cause it's like having a house with no asset.
- [00:41:14.271]It's just patronizing.
- [00:41:18.142]And the example of immigration, I'll go back to that one
- [00:41:20.444]it's very different depending on where you live.
- [00:41:22.880]Immigration to me is another person from another
- [00:41:25.950]interesting country who has a PhD.
- [00:41:27.852](Audience laughing)
- [00:41:29.320]That's what it means where I live, right?
- [00:41:31.522]But that's 'cause I'm in the top 20%.
- [00:41:33.624]If you're living in public housing in France
- [00:41:36.160]and those resources have been finite
- [00:41:39.330]and those resources have been cut,
- [00:41:41.031]and you're the ones that are confronted with
- [00:41:42.533]incredibly different cultures, coming in
- [00:41:44.835]not integrating with you, taking the resources from you
- [00:41:47.805]at least as you perceive it, and that's what's been
- [00:41:49.974]ignored by the national front,
- [00:41:51.609]don't expect them not to make endroads. Because it gels
- [00:41:53.477]with everybody's common sense.
- [00:41:56.413]Regardless of whether we can say, well on average
- [00:41:58.082]immigrants benefit the economy.
- [00:42:00.284]No one lives in an average.
- [00:42:03.020]Now the problem here, and I'll close with this,
- [00:42:04.355]is that you can identify with all of that
- [00:42:06.290]and I hope to understand populism, people begin to
- [00:42:08.559]accept that because it's not joining one side
- [00:42:11.028]or the other. To understand the phenomenon,
- [00:42:13.030]to defeat a phenomenon you need to understand it.
- [00:42:15.566]But it's the problem is over here.
- [00:42:17.534]Their economic policies are trash.
- [00:42:20.638]They can't work.
- [00:42:22.606]The first one as I explained with immigration and debt
- [00:42:24.642]you need more immigrants not less or you're gonna
- [00:42:26.610]go bankrupt. Think about this one.
- [00:42:28.779]This country 80% of all financial assets
- [00:42:31.248]are held by baby boomers.
- [00:42:33.817]80% of those assets are held by 20% of baby boomers.
- [00:42:38.355]They're gonna get liquidated in the next 20 years
- [00:42:39.990]because everybody dies.
- [00:42:42.059]And when they do, it will either be spent in
- [00:42:44.295]the most inefficient way possible
- [00:42:45.729]running down those assets until you qualify for Medicare
- [00:42:49.099]which is just insane
- [00:42:50.668]or it will lead to the greatest non-work transfer of
- [00:42:53.637]wealth in the history of the republic.
- [00:42:55.906]Whereby an entire generation inherits
- [00:42:58.008]a huge amount of cash for doing nothing.
- [00:43:00.344]That's not good.
- [00:43:03.047]Globalization, Walmart, wages. It's all a problem.
- [00:43:06.050]But there's also an upside to this.
- [00:43:08.319]The only reason people are actually able to eat just now
- [00:43:10.387]is because of global supply chains.
- [00:43:12.323]If you want to tear all that down,
- [00:43:13.691]exactly where are you gonna get not just your kiwi fruit
- [00:43:15.426]from, your very basics.
- [00:43:18.028]Given how complex the interdependencies in the
- [00:43:20.164]world economy are.
- [00:43:21.865]So simply targeting inwards, there's a country
- [00:43:24.101]that tries this. It's called North Korea.
- [00:43:25.836]It's not very good.
- [00:43:29.740]Globalization has certainly harmed a lot of jobs.
- [00:43:32.042]But not as much as you think.
- [00:43:34.211]The main culprit has been technology
- [00:43:35.980]and also labor migration.
- [00:43:37.715]What do I mean by that?
- [00:43:39.450]Wisconsin lost one third of its jobs not to Mexico
- [00:43:42.386]but to Texas and Florida and other right to work states
- [00:43:46.256]back in the 1970's.
- [00:43:48.058]We've been industrializing for a very long period.
- [00:43:50.361]And particularly in manufacturing. Capital substitutes
- [00:43:53.497]for labor really efficiently. Not so in services.
- [00:43:55.699]Fastest largest volume growing job in the United States,
- [00:43:59.203]elder care nurse,
- [00:44:01.638]and home help.
- [00:44:03.340]'Cause that's where we need it 'cause the baby boomers
- [00:44:05.142]are getting older and they need the help, right?
- [00:44:07.111]But in manufacturing, robots will take everything.
- [00:44:10.881]But this has been going on for 50 years
- [00:44:12.383]so the notion that this is NAFTA.
- [00:44:13.617]NAFTA's a rounding error on this.
- [00:44:16.987]And if you try and dismantle all that,
- [00:44:19.289]all you do is piss off the Canadians.
- [00:44:21.325]Nobody wants to do that.
- [00:44:22.893](audience laughing)
- [00:44:24.895]They will deny us maple syrup.
- [00:44:27.097](audience laughing)
- [00:44:28.599]And NFL.
- [00:44:30.634]That's not worth it.
- [00:44:32.569]And finally the last one, I'll come back to this
- [00:44:34.004]is aging. At the end of the day we're an older society
- [00:44:36.640]and an older society is one that saves too much
- [00:44:39.476]and invests too little. Because when you're at the,
- [00:44:41.879]to sound like an economist, when you're at the end
- [00:44:44.381]of the life cycle, you care about present consumption.
- [00:44:47.151]So you don't care about the ability of somebody else
- [00:44:49.453]who you don't know to go to college.
- [00:44:51.321]So you vote for tax cuts because that's in your
- [00:44:53.490]immediate interest 'cause you want to leave it all
- [00:44:54.958]to your kids.
- [00:44:56.860]But the world your kids are gonna grow up in
- [00:44:58.395]is the one that everybody else's kids are growing up in.
- [00:45:00.631]And if 80% of them think the system's bust
- [00:45:02.599]and 66% of you here think the system's bust
- [00:45:06.637]by the voting I saw earlier,
- [00:45:08.372]then it doesn't matter how much you try and self insure
- [00:45:10.774]through assets for your own kids.
- [00:45:12.576]You're leaving them a sh**ttier country.
- [00:45:14.845]Don't do that.
- [00:45:16.880]And the first step to that, it's very simple.
- [00:45:18.882]Go back to that graph.
- [00:45:22.052]Imagine what would happen if you had free college
- [00:45:23.620]tuition. 60 billion a year would do it.
- [00:45:26.657]We spend more on DARPA in the defense research institutes.
- [00:45:31.128]Subsidized child care. Imagine what it'd actually be like
- [00:45:33.297]if women particularly single mothers were actually able
- [00:45:36.133]to be active members of the workforce rather than being
- [00:45:39.036]general stress cases as they spend 60% of their take home
- [00:45:42.573]pay getting their kids looked after so they can put
- [00:45:45.008]40% on the table to feed them.
- [00:45:47.578](clapping)
- [00:45:53.183]Every other country in the world has managed
- [00:45:55.552]to have a single payer health care system.
- [00:45:57.788]It's just more efficient.
- [00:45:59.423](clapping)
- [00:46:01.658]We spend 17% of GDP on health care.
- [00:46:04.728]Everybody else spends about seven. 10% of American GDP
- [00:46:08.098]is more money than I could spend on a Victoria's Secret
- [00:46:12.202]supermodel.
- [00:46:13.337](audience laughing)
- [00:46:14.471]And that's a lot of money.
- [00:46:15.772]Imagine what we could do with that.
- [00:46:18.575]Something that really would help.
- [00:46:20.377]We have this obsession with short termism.
- [00:46:22.846]Quarterly reports, share holder value.
- [00:46:25.182]What that means is, I've met tons of CEOs and
- [00:46:27.718]they all say the same thing.
- [00:46:29.153]I would love to invest in communities.
- [00:46:30.988]I would love to do more long term R and D.
- [00:46:33.223]I'd love to onshore stuff, I really would.
- [00:46:35.259]But I can't because if somebody gets control of five
- [00:46:37.961]percent of my shares, usually some activist idiot
- [00:46:40.297]from a hedge fund, then they will come and replace
- [00:46:42.666]the entire board because they're not maximizing
- [00:46:44.635]the share price.
- [00:46:46.236]Well how about we change corporate incentives
- [00:46:48.238]by changing the law to stop that nonsense?
- [00:46:50.307]And then you'll be more like German corporations.
- [00:46:52.242]And then we could make the BMWs for a change.
- [00:46:55.112](Audience laughing)
- [00:46:56.680]And finally the last one.
- [00:46:57.948](clapping)
- [00:46:59.917]Why is it okay for Facebook and Google to know more
- [00:47:01.785]than the CIA about who you are?
- [00:47:03.587](audience laughing)
- [00:47:05.255]And then to sell that for profit?
- [00:47:07.591]And Equifax that have all your details
- [00:47:09.493](clapping)
- [00:47:10.561]and then lose it and go whoops.
- [00:47:12.863]What's happening is we're building these
- [00:47:14.698]winner take all digital monopolies.
- [00:47:16.833]The margins on which are incredible.
- [00:47:20.003]Imagine you have a 60% profit margin
- [00:47:21.905]because the cost of providing your marginal costs
- [00:47:23.907]your next good is zero which is what these guys have.
- [00:47:26.677]So what's their incentive to invest?
- [00:47:29.780]Well they could send a rocket to the moon
- [00:47:31.582]and we're doing deep mine, yeah, whatever, great.
- [00:47:34.318]But what's your actual investment in communities?
- [00:47:36.553]What's your investment in labor?
- [00:47:37.888]We don't have to have one, it's just scalable tech.
- [00:47:41.024]So because of that your costs are incredibly low,
- [00:47:43.227]your returns are unbelievably high. You're making money
- [00:47:45.896]for just showing up and because you're a monopolist
- [00:47:47.698]huge barriers to entry, nobody else gets to play.
- [00:47:50.934]That's what we're turning the economy into.
- [00:47:53.070]So it's a Ron Teer's paradise.
- [00:47:54.938]It doesn't work to work.
- [00:47:57.608]It only pays to be one of those guys.
- [00:47:59.943]We can't all be one of those guys.
- [00:48:02.980]So a simple way to do it is just follow that.
- [00:48:04.948]Those five things. Just do that.
- [00:48:06.383]And you'll kill populism in a heartbeat.
- [00:48:08.619]And if you don't, don't be surprised if they're in charge.
- [00:48:11.555]Thanks.
- [00:48:12.856](clapping)
- [00:48:29.840]MIKE ZELLANY: Thank you very much professor for your
- [00:48:30.974]inspiring discussion and proposed solutions at the end.
- [00:48:34.411]At this time, Dr. Blyth will take questions from the
- [00:48:36.613]audience. Please submit your questions on Twitter
- [00:48:40.050]using the hashtag E.N. Thompson Forum.
- [00:48:42.486]You may also write questions on notecards which
- [00:48:44.154]are provided by the ushers.
- [00:48:46.023]Our first question this evening comes from
- [00:48:47.791]the students, the E.N. Thompson international scholars.
- [00:48:52.896]Professor Blyth, do you believe that American people
- [00:48:55.098]voted against their best interest due to a
- [00:48:57.134]deteriorating trust for the system? And if so,
- [00:48:59.770]do you think the 2008 financial crisis could've been
- [00:49:01.838]the beginning?
- [00:49:04.408]DR. BLYTH: I think it is begun long before the financial crisis.
- [00:49:06.810]The financial crisis exacerbated what was going on
- [00:49:09.012]but the generic collapse in trust in public institutions
- [00:49:12.616]has been a long time coming.
- [00:49:14.618]And has many, many causes some of which I've talked about
- [00:49:17.020]there so. But I don't think people vote against their
- [00:49:19.623]best interest. I really don't. I will defend the right
- [00:49:23.226]of the most hardcore Trump voter vote for Trump.
- [00:49:28.031]Because at the end of the day, your life experience
- [00:49:30.067]says I really don't believe a word that anybody else
- [00:49:33.370]says and this guy may be a horse s**t peddler
- [00:49:35.172]but he speaks my type of language.
- [00:49:37.407]Right. I mean put it this way, here's a way to think
- [00:49:40.243]about this and I'm quite serious.
- [00:49:41.912]If you really think someone's a liar,
- [00:49:43.680]there is no point in putting any investment in them.
- [00:49:46.950]You will be disappointed. If you think
- [00:49:48.885]someone's a bulls**t artist, there might be an upside.
- [00:49:51.355](audience laughing)
- [00:49:52.689]Right?
- [00:49:53.690]Why not?
- [00:49:54.891]On the other hand if things get worse, they finally get
- [00:49:57.194]worse for the top 20%. Welcome to my downside.
- [00:50:02.532]Germans have a word for this its schadenfreude.
- [00:50:04.935](audience laughing and clapping)
- [00:50:08.805]Nobody thinks that way. I do. I'm evil in some sense.
- [00:50:12.476]Anyway that's my sincere answer.
- [00:50:14.845]MIKE: Mark, what do you think about the free health care
- [00:50:16.513]in the UK? Does it work because of the country's size
- [00:50:18.615]or another reason?
- [00:50:20.984]BLYTH: You can do it on all sorts of scales. It doesn't have
- [00:50:23.053]to be one giant bureaucracy. I mean the (inaudible)
- [00:50:25.322]kind of out of control. It's too hierarchical,
- [00:50:28.792]it tries to serve the entire nation. You can have
- [00:50:31.228]devolved regionally funded versions of this
- [00:50:33.697]that share costs across things.
- [00:50:35.499]My basic point is everybody else's money should do this
- [00:50:38.935]and they all spend less than we do. Usually half.
- [00:50:41.705]And health care outcomes. Longevity, Japan kicks ass.
- [00:50:45.776]Quality of life, less stress. Spain tops the list.
- [00:50:49.479]Not this weekend. Things are kicking off. But usually right?
- [00:50:52.916]There's lots of different ways you can look at this.
- [00:50:55.218]If you want sort of like highly stressed out societies
- [00:50:58.221]with lots of social problems, we rock. Right?
- [00:51:01.124]In part because we work too many hours and because of that
- [00:51:03.894]we're totally stressed so we consume far too many
- [00:51:06.263]pharmaceuticals, et cetera, et cetera, et cetera.
- [00:51:09.065]So it's not just the question of the nature of the
- [00:51:10.934]payer system. It's what do you expect health care to do.
- [00:51:14.538]And that's part of a larger conversation maybe about
- [00:51:16.807]what are we trying to do because we are all just
- [00:51:19.176]running to stay still. Apart from a few of us
- [00:51:21.878]who have managed to basically take the cake.
- [00:51:24.181]And really until we get to the heart of that
- [00:51:26.349]everything else is skirting around the issue.
- [00:51:29.119]MIKE: Thank you. We'll stay in the United Kingdom.
- [00:51:30.720]Why did the Brits vote for Brexit?
- [00:51:32.756]BLYTH: Because they're morons.
- [00:51:34.624](audience laughing)
- [00:51:36.426]MIKE: Next question.
- [00:51:37.360]BLYTH: So, this is when it becomes comedy.
- [00:51:39.963]But it's also tragedy and the best comedy is tragedy, right?
- [00:51:43.967]So, here's the way it worked before.
- [00:51:46.470]The Brits had the thing called the pound, right?
- [00:51:49.239]It was cute. Had a picture of Elizabeth on it, right?
- [00:51:51.107]They were never going to join the euro and because
- [00:51:54.010]they were never going to join the euro,
- [00:51:55.512]they didn't have to put up with any of the nonsense
- [00:51:57.147]that the Germans and their perpetual belt tightening.
- [00:51:59.916]Any of that crap. They didn't have to put up with all these
- [00:52:02.352]rules called the Fiscal Compact and the Deficit
- [00:52:04.421]Reduction Procedure. They were never going to join.
- [00:52:07.457]And the best thing about being a country
- [00:52:09.059]is having your own money.
- [00:52:10.994]'Cause if your banking system goes poof, you can
- [00:52:13.263]print money to save it, if you want.
- [00:52:15.665]You could also decide not to.
- [00:52:18.001]You can take a hit through the exchange rate
- [00:52:20.270]because you have one so you basically default slowly
- [00:52:23.540]on foreigners in your cash rather than on your own
- [00:52:26.209]people. If you don't have your own currency,
- [00:52:28.645]if you give that up, you can't do any of these tricks.
- [00:52:31.314]And what that means is either you let everything default,
- [00:52:34.784]you blow up the banking system for the whole of Europe
- [00:52:37.487]which would be crazy
- [00:52:39.122]or alternatively you squeeze internal devaluation.
- [00:52:41.892]Welcome to Greece, right?
- [00:52:43.793]Why is Greece in such a circ, that's why.
- [00:52:45.128]They don't have their own money.
- [00:52:47.163]Now, the Brits are smart enough to go, we're never
- [00:52:48.698]giving this up. We're one of the big three,
- [00:52:50.667]we get to like tell the Germans and the French no
- [00:52:53.203]we're not doing that, no we're doing that.
- [00:52:54.771]We get to veto anything we don't like.
- [00:52:56.406]We have our own massive financial sector
- [00:52:58.875]which is really big and earns us tons of money.
- [00:53:01.711]We get to clear all these euro transactions.
- [00:53:03.813]We have this lovely little hedge currency
- [00:53:06.182]between the euro and the dollar called the pound.
- [00:53:08.585]It's deep and it's liquid. Our property markets
- [00:53:10.620]are the biggest money laundering scheme on the planet.
- [00:53:13.657]We have the best deal ever.
- [00:53:17.594]David Cameron renegotiated the best deal ever.
- [00:53:20.196]And then decided he didn't like it.
- [00:53:22.866]Took it to the British people and said
- [00:53:24.200]what do you think of the EU?
- [00:53:25.769]And they basically said, we don't know but we hate you.
- [00:53:29.372](audience laughing)
- [00:53:30.874]'Cause it wasn't really about the EU. It was about
- [00:53:32.642](high pitched laser noise)
- [00:53:33.677]to the elites basically
- [00:53:35.211]and then the result came in and they went
- [00:53:37.047]oh crap. So they handed it to May
- [00:53:38.648]and now May has to negotiate the best deal ever
- [00:53:42.419]having defaulted on the best deal ever twice.
- [00:53:45.522]So, in my book they're morons.
- [00:53:47.924]Now, is that fair? Yeah, if you're gonna decide
- [00:53:50.493]on something as complex and important as the EU,
- [00:53:53.563]have a debate about the EU. Don't make up stuff about
- [00:53:56.933]350 million a week for the health care system
- [00:54:00.470]if we don't pay taxes to Brussels.
- [00:54:02.639]You might as well turn around and say
- [00:54:03.840]well, Marc Blyth would be seven foot tall
- [00:54:05.342]if he didn't eat carrots.
- [00:54:07.243](audience laughing)
- [00:54:08.478]There's just as much factual content in that one.
- [00:54:11.014]But we've got this world where that we're like
- [00:54:13.083]you have to give both sides of the debate an answer.
- [00:54:15.585]All right. Over here we have someone with facts
- [00:54:17.220]and knowledge and data,
- [00:54:18.688]and over here we have a complete lunatic.
- [00:54:20.590]Let's give them equal time. That was basically
- [00:54:21.925]the Brexit vote.
- [00:54:23.460](audience clapping)
- [00:54:25.996]MIKE: All right, let's take some wrap up for our questions
- [00:54:27.430]from our rapidly filling up Twitter feed this evening.
- [00:54:30.233]First, what happens when there are no more jobs
- [00:54:31.668]because robots have taken them all?
- [00:54:33.870]BLYTH: Robots can't take them all for the simple reason
- [00:54:35.505]that the fastest growing jobs for the next
- [00:54:37.440]20 years are gonna be looking after baby boomers
- [00:54:39.709]and they haven't invented that robot yet.
- [00:54:42.612]When we talk about robots, once you get out of
- [00:54:45.115]manufacturing which is shrinking everywhere
- [00:54:47.484]because you can efficiently add robotic processes,
- [00:54:50.020]what you're really talking about is things called
- [00:54:51.921]algorithmic processes, right?
- [00:54:53.823]Can machines learn to do things and if they can,
- [00:54:56.226]can those tasks be routinized in such a way
- [00:54:59.129]that they can do them much faster and much more efficiently.
- [00:55:02.666]This is where you're taking jobs. Now where do you taking
- [00:55:04.768]jobs? Number one, the financial sector.
- [00:55:06.836]Why? Because they've lent all this money
- [00:55:09.539]and we're not borrowing anymore
- [00:55:11.107]'cause our wages aren't going up.
- [00:55:12.575]So the only way they're gonna maintain their margins
- [00:55:14.244]is if they cut their costs. So what do they do?
- [00:55:17.280]They're automating the whole back office.
- [00:55:19.482]It's called Fintech. Financial technology, right?
- [00:55:22.519]They're the jobs that are actually more vulnerable to this
- [00:55:24.688]than anything else. Manufacturing is going the way
- [00:55:27.023]of 19th century manufacturing. It has been replaced
- [00:55:31.494]by something better and smarter. What bothers me is
- [00:55:34.297]what happens when you have concentration of retardants
- [00:55:37.100]to assets. It's not about the robots.
- [00:55:39.736]It's about who controls the retardants the robots.
- [00:55:42.105]'Cause if a handful of monopolistic digital firms
- [00:55:44.274]actually control these technologies, they're just gonna
- [00:55:47.343]basically extract rents from the rest of society
- [00:55:50.213]and pay us whatever they see fit.
- [00:55:52.682]That's when it becomes really problematic.
- [00:55:54.718]But it's not about robots, right?
- [00:55:57.053]That's not the one to worry about.
- [00:55:58.755]The second thing, I must say this as well, it's actually
- [00:56:01.124]very important. Every time that there's been
- [00:56:03.326]a technological revolution, there's been a net increase
- [00:56:06.162]in the size of the labor market not a decrease.
- [00:56:07.897]So why should this time be different?
- [00:56:10.567]Well because it's digital, it's different, it's gonna
- [00:56:12.702]happen so fast, blah blah blah.
- [00:56:14.170]Sweden.
- [00:56:16.306]Very high taxed and transfer society, welfare state,
- [00:56:18.808]big state, the whole lot, right?
- [00:56:20.610]Number two in the world for startups.
- [00:56:22.579]Very technologically advanced. Five percent of their
- [00:56:24.781]transactions last year were cash.
- [00:56:27.183]Everything else is digital.
- [00:56:28.518]They are already a digital society.
- [00:56:30.687]They still got employment.
- [00:56:33.223]Let's have a little faith here.
- [00:56:34.724]We remember the jobs that are being lost
- [00:56:36.426]we are unable to picture the jobs that will be there.
- [00:56:39.262]I still have faith that that's the case.
- [00:56:40.864]MIKE: Considering how it has destroyed some economies
- [00:56:44.367]do you think debt has a place in them?
- [00:56:46.669]BLYTH: Well remember debt's not a bad thing unless
- [00:56:48.505]you speak German.
- [00:56:49.806](audience laughing)
- [00:56:51.941]Sprechen sie Deutsch?
- [00:56:54.043]Yeah.
- [00:56:55.345]What is the word for debt?
- [00:56:57.981]Schuld.
- [00:56:59.482]Which is the same word as guilt.
- [00:57:01.551](audience laughing)
- [00:57:02.585]I'm not making this up.
- [00:57:04.387]I wish I were.
- [00:57:05.989]Any Italians here? Italian speakers?
- [00:57:08.925]Anybody speak Italian?
- [00:57:10.827]Catholics? Any Catholics here?
- [00:57:12.262]Half the town's Catholic. What's the middle of the mass
- [00:57:15.498]called where you profess your faith?
- [00:57:18.468]The credo. Comes from the Italian and Latin credere.
- [00:57:22.205]To credit.
- [00:57:24.274]Uhhhhhhh.
- [00:57:25.341]See a bunch of people who think debt is guilt.
- [00:57:27.977]And you've got another bunch of people
- [00:57:29.445]who think debt is credit.
- [00:57:32.048]What's the secondary meaning of credit in English?
- [00:57:35.852]To believe.
- [00:57:37.487]What's the credo? The profession of faith.
- [00:57:40.924]The whole thing's based on faith. You just believe
- [00:57:42.725]you're gonna get paid back. That's it.
- [00:57:44.928]Now, you can have an attitude to that that like debt
- [00:57:47.397]is an obligation that must be paid back.
- [00:57:49.399]Or you can say no, the reason you get paid an interest rate
- [00:57:51.734]is 'cause you're taking a risk.
- [00:57:53.303]Here's the risk. You might not get paid back.
- [00:57:55.605]It's not a moral obligation.
- [00:57:57.407]So debt is the opposite of credit.
- [00:57:59.275]Assets are the opposite of liabilities.
- [00:58:00.777]There's nothing wrong with debt.
- [00:58:03.079]It's a question of who's been asked to bear it.
- [00:58:04.948]And if you're asking people to take on debt
- [00:58:07.517]that you know they can't pay back, you're a predator.
- [00:58:09.986](audience clapping)
- [00:58:17.894]MIKE: Based on your proposed solutions,
- [00:58:20.363]are there any US politicians who can get elected?
- [00:58:23.433]BLYTH: I think so. I do. And he'll be too old to do it himself
- [00:58:26.903]but I'm a big believer in Bernie.
- [00:58:29.205](audience applause)
- [00:58:31.541]The reason being
- [00:58:33.509]apparently he's not the nicest guy. I don't know
- [00:58:35.345]but he seems very avuncular, who knows, right?
- [00:58:38.348]But that's irrelevant. Who cares about personality
- [00:58:40.216]it's what you're saying, what are you putting on the
- [00:58:42.185]platform? What are you actually telling us?
- [00:58:43.720]And he's actually pointing out good God, if we could
- [00:58:46.456]save ten percent of GDP, you wouldn't need to have
- [00:58:49.692]1.2 trillion in student loan debt weighing
- [00:58:51.628]down the next generation.
- [00:58:53.563]So basically save it in health care, you can just wipe
- [00:58:55.665]out the student loan problem.
- [00:58:57.300]This is simple accounting. Why are we giving guaranteed
- [00:59:00.503]interest rate repayments to commercial banks
- [00:59:04.440]to give you students loans which you can't default on
- [00:59:08.244]'cause you're not allowed to? That's called usury.
- [00:59:12.115]That's ridiculous.
- [00:59:13.549](audience clapping)
- [00:59:14.884]It's not a debt if you can't default on it.
- [00:59:17.787]It's not a moral obligation to go back to the earlier one
- [00:59:20.423]so I think that he's on the right track.
- [00:59:22.659]Now somebody else is gonna take this on.
- [00:59:24.093]I think that the world changes in cycles just like
- [00:59:26.329]these regimes but I'll give you an example
- [00:59:28.398]just now in Britain. May is dead.
- [00:59:30.533]The conservative party's dead. Their message is dead.
- [00:59:33.036]There's a guy you've heard of Jeremy Corbyn.
- [00:59:34.437]Jeremy Corbyn's the leader of the labor party.
- [00:59:37.440]He basically bought out the labor party
- [00:59:39.242]as a kind of completely unfunded leverage buyout
- [00:59:42.278]of a dead institution and he walked in and said
- [00:59:45.315]let's actually talk about things that make
- [00:59:47.116]a difference in the lives or ordinary people
- [00:59:49.152]and everyone said, you outdated 1980's socialist,
- [00:59:51.788]go away. So he's completely pillared
- [00:59:54.324]and oppressed
- [00:59:55.558]and he's made to be a moron, whatever, fine.
- [00:59:57.493]There's a brilliant book about the 1970's by
- [01:00:00.630]Perlstein called The Invisible Bridge.
- [01:00:03.433]Has anybody ever read it?
- [01:00:05.234]No? I highly recommend it. Big book.
- [01:00:07.370]The 70's were bonkers. The young people have no idea
- [01:00:11.107]how mental it was. And it's a book about the 70's
- [01:00:13.977]but it's also a book about Ronald Reagan.
- [01:00:16.079]And in 1969 he was on the board of regents
- [01:00:18.648]of University of California Berkeley and he was
- [01:00:20.850]going on about free speech and the oppression of speech
- [01:00:24.420]amongst right wing students and he was giving a damn
- [01:00:27.090]about religious rights and he didn't think
- [01:00:29.325]the government should be in our affairs
- [01:00:31.294]and all this stuff Reagan stood for.
- [01:00:33.363]And this was the summer of love.
- [01:00:36.065]Never had someone been so long and wrong
- [01:00:38.534]in a historical moment. He was a laughing stock.
- [01:00:42.872]By the end of that decade the entire world
- [01:00:44.941]had come to him. He hadn't changed at all.
- [01:00:48.144]Everything else had moved and joined up.
- [01:00:50.747]I think we're undergoing a similar transition.
- [01:00:52.982]I think that the money doctors saved the regime
- [01:00:55.084]that was born in 78 and died in 2008.
- [01:00:58.855]They pumped it along on monetary life support
- [01:01:01.357]but it ultimately is bankrupt financially,
- [01:01:04.494]intellectually and morally.
- [01:01:06.396]And I think particularly the young generations see this.
- [01:01:08.531]The recent British election where had it run
- [01:01:10.700]for another few days, Corbyn would have won
- [01:01:12.602]despite the fact that every pundit was producing
- [01:01:15.972]projection after projection saying landslide
- [01:01:18.608]for the conservatives.
- [01:01:20.710]And also, you can think about Trump's victory
- [01:01:22.779]the same way. People have had enough.
- [01:01:25.581]And one way or another they're gonna vote for change.
- [01:01:28.317]I think there are positive and progressive forces
- [01:01:30.720]out there and that all we need to do is bide our time.
- [01:01:34.023]'Cause that moment of change is coming again
- [01:01:35.758]where the people who are laughed at will be the ones
- [01:01:37.794]where the world comes to them.
- [01:01:40.730]MIKE: Mark, why did the word China not appear in your talk?
- [01:01:44.734]BLYTH: Because they paid me not to.
- [01:01:47.003](audience laughing)
- [01:01:48.871]I'm a paid agent of the Chinese communist party.
- [01:01:50.940]Well it depends how you handle it.
- [01:01:52.942]Here's my shtick on China. They're back.
- [01:01:56.679]If you ever get a chance to go to Shanghai,
- [01:01:59.749]go to the Shanghai Museum of Urban Planning.
- [01:02:03.586]I think they call it that to make sure you don't go.
- [01:02:07.723]But when you go and it's kind of a car park.
- [01:02:09.659]It's like a square Guggenheim's so rather than being
- [01:02:11.861]round right with paintings, it's square.
- [01:02:14.764]And you go in and the first one, it's all calligraphy,
- [01:02:17.333]and there's a big piece of Chinese writing
- [01:02:19.502]and it says something like, 3800 BC dig a ditch.
- [01:02:24.140]And you go along like a few feet
- [01:02:25.908]and there's another big bit of calligraphy
- [01:02:27.343]and the translation at the bottom
- [01:02:28.411]and while you're at it, clean up the trash.
- [01:02:30.213]And then you go along, it's another 100 years
- [01:02:31.681]and it says, and while you're at it,
- [01:02:33.516]get that rowdy lot from the downstairs and put them in jail.
- [01:02:36.319]And you go along and it says
- [01:02:37.553]and then put in street lights.
- [01:02:38.788]And then by the time you go up and there's light
- [01:02:40.723]by the time that my people are running around
- [01:02:42.458]painting themselves blue and eating each other.
- [01:02:44.494]They're like, oh we need to figure out a public
- [01:02:45.995]education system.
- [01:02:47.497]We're gonna allot this much of the budget for doing this
- [01:02:49.999]blah blah blah and it's like this is year zero for us.
- [01:02:53.302]The beginning of the age of Christ, right?
- [01:02:55.738]So what you do is you walk up and you go holy crap.
- [01:02:59.275]These guys have been around for a long time.
- [01:03:01.210](audience laughing)
- [01:03:02.912]And what you're also getting is a message
- [01:03:04.380]this is the Chinese state. This is what we do.
- [01:03:08.117]Don't get in the way.
- [01:03:10.686]So you get up to where they get to the opium wars
- [01:03:12.522]and the complete breakdown of China
- [01:03:14.157]which I believe if memory serves me right
- [01:03:16.392]they call the European interregnum
- [01:03:18.895]or something an anadem like this.
- [01:03:20.530]It takes up like half a wall.
- [01:03:23.132]Then there's Mao. You'd think that would be a big thing.
- [01:03:25.902]Seriously he gets one panel.
- [01:03:28.237]And then you open a door, you ever seen the film
- [01:03:30.506]Mission Impossible?
- [01:03:32.241]They have a scale model of Shanghai and they've got
- [01:03:35.077]guys on wires coming down putting the buildings in.
- [01:03:37.813]Hi. We're back.
- [01:03:39.916]Right?
- [01:03:41.250]Now, why are they doing this?
- [01:03:42.585]It's a show of the power of the state.
- [01:03:44.921]And that's the way that works.
- [01:03:46.489]That's the way their economy works.
- [01:03:47.690]They're not top down communists.
- [01:03:49.358]Don't think that for a minute.
- [01:03:50.493]They're the most fiscally decentralized country
- [01:03:52.828]in the world. 80% of their public expenditure
- [01:03:55.131]is spent at the local level.
- [01:03:56.999]Like when we talk about giving back to the states
- [01:04:00.036]the republicans' master plan would be half of
- [01:04:03.406]what China has already achieved.
- [01:04:05.341]Because they've got 1.2 billion people.
- [01:04:08.110]So they have regions which have a hundred million
- [01:04:10.580]people in them. You can do a lot of experiments.
- [01:04:14.617]You can get things wrong and still get things right.
- [01:04:17.019]They are very robust the shocks.
- [01:04:19.355]Now we don't let them buy stuff.
- [01:04:20.856]We have a thing called the national security
- [01:04:23.326]foreign investment act of 2007 they can't buy guns,
- [01:04:25.528]can't buy tech, can't buy pharma,
- [01:04:27.797](mouth fart noise)
- [01:04:28.931]go away. So we sell them stuff. They sell it through
- [01:04:31.200]a Walmart, they get dollars,
- [01:04:33.069]we make them buy treasury bills.
- [01:04:35.071]They're fed up doing that. They're not stupid.
- [01:04:36.439]So they've got this project called one belt one road.
- [01:04:39.408]If we're not allowing them to buy assets here,
- [01:04:42.245]they will go form assets elsewhere.
- [01:04:44.313]They're investing 40 billion dollars in ports
- [01:04:47.216]in Pakistan. They've already built a railway
- [01:04:50.219]that stretches right across Transcaucasia.
- [01:04:52.688]You can bet that those nice compliant governments of
- [01:04:54.357]Tajikistan, Kazakhstan and the rest of them
- [01:04:56.525]will make sure that nobody ever buys anything
- [01:04:58.961]near that railway line.
- [01:05:00.963]You'll bet that that railway line will be moving
- [01:05:02.665]freight trains at 300 miles an hour
- [01:05:04.800]while we're still dealing with a seller.
- [01:05:07.970]And on those freight trains will be all the goods
- [01:05:09.639]that Europe can possibly wanna consume.
- [01:05:12.508]They'll just bypass us.
- [01:05:14.877]Now, you can either engage with that.
- [01:05:16.545]You can get into a stupid fight with that
- [01:05:18.781]over some islands which is utterly pointless
- [01:05:21.317]'cause at the end of the day
- [01:05:22.551]it's their neighborhood not yours
- [01:05:24.987]and more to the point, unless you're willing
- [01:05:26.689]to actually invade them, occupy them, and kill them
- [01:05:28.724]don't try.
- [01:05:30.760]We've been doing a lot of that, it's usually working out
- [01:05:32.662]badly.
- [01:05:33.929](audience laughing)
- [01:05:35.364]So, they're just gonna bypass us and do their thing.
- [01:05:37.433]You can either engage with that and sort our own house
- [01:05:39.735]out. As the most powerful country in the world,
- [01:05:42.471]as the richest country in the world
- [01:05:44.073]we still got so much we can do.
- [01:05:46.509]Or we can retreat inward and worry about China
- [01:05:49.245]as a threat and say that we can't have health care
- [01:05:51.714]and we can't do this, we can't do that
- [01:05:53.616]while all the profit's go to a tiny handful of people
- [01:05:56.319]who are telling us all that stuff.
- [01:05:59.088]I don't wanna do that.
- [01:06:01.123](audience clapping)
- [01:06:07.096]MIKE: Do you believe there is a tech bubble or entrepreneurial
- [01:06:09.532]facade that promotes a false sense and lack of genuine
- [01:06:12.301]innovation?
- [01:06:14.603]BLYTH: Oh my god, yes. Absolutely.
- [01:06:15.805]Was it called Juicerove? Anybody hear about this one?
- [01:06:19.208]Or Juicera or one of these things? You know about this one?
- [01:06:21.911]So millions of dollars of silicon valley money
- [01:06:25.815]into this wonderful thing we're buying.
- [01:06:27.883]You know those green juices you get usually at airports
- [01:06:30.519]and you drink them 'cause you're about get on a plane
- [01:06:32.321]and you don't want to die but nobody actually likes them?
- [01:06:34.090](audience laughing)
- [01:06:35.424]Right.
- [01:06:36.425]So imagine you could make this at home.
- [01:06:38.494]Well I can, I can put s**t in a blender and press go, right?
- [01:06:41.263]No, no, no. To get the real nutrients out
- [01:06:44.400]what you need is a press which has like the power
- [01:06:47.336]of seven planets gravitational whatever
- [01:06:50.573]and so basically you buy this bag of fruit.
- [01:06:53.576]And you put it in this big press and it goes
- [01:06:55.277](grunting)
- [01:06:56.278]and all this juice comes out and it's amazing.
- [01:06:57.980]So millions and millions and millions of dollars
- [01:07:00.015]into a technology which we already have
- [01:07:01.751]called a fruit press but anyway.
- [01:07:04.620]It's fancy, right?
- [01:07:06.055]So they put this out and some guys at the Wall Street
- [01:07:07.990]Journal got one of these things and went
- [01:07:09.725]I don't believe for a minute it says that it's like
- [01:07:11.794]the power of three suns or whatever it is.
- [01:07:13.896]So they put it on and they squeezed the juice
- [01:07:16.065]and they got the juice bag and one of them held it
- [01:07:18.200]and the other one squeezed it.
- [01:07:19.802]And they got more juice out squeezing it.
- [01:07:21.537](audience laughing)
- [01:07:23.372]This actually happened.
- [01:07:24.640]End of company.
- [01:07:27.276]So all this sort of like unicorn stuff
- [01:07:28.878]that's out there that people refer to,
- [01:07:30.546]this is a status competition.
- [01:07:33.549]There was an economist at the turn of the century
- [01:07:35.217]called Thorstein Veblen, he wrote
- [01:07:37.019]The Theory of the Ledger Class
- [01:07:38.788]and it really applies to today as much as it did then
- [01:07:41.323]when the Vanderbilts and all that were around.
- [01:07:43.392]It's about showing off that you're part of the community.
- [01:07:46.429]That you're another silicon valley entrepreneur
- [01:07:48.964]with your finger on the pulse,
- [01:07:50.733]investing in the latest thing. Why?
- [01:07:52.802]Because that's what your buddy does and you're all
- [01:07:54.503]in the same club together
- [01:07:55.905]and you're now all 50 and you're buying blood from
- [01:07:58.207]third world children and giving your self infusions
- [01:07:59.909]so you can live forever. That s**t goes on.
- [01:08:02.344](audience laughing)
- [01:08:04.447]So I've heard.
- [01:08:05.481]But anyways, it's a status competition.
- [01:08:08.517]Does it really matter if you lose the money?
- [01:08:10.119]No. Because you've got so much.
- [01:08:12.988]So, when you talk about being on the technological frontier,
- [01:08:15.591]we're there.
- [01:08:17.059]When you do the next big innovation, it's not another
- [01:08:19.295]app on my phone that I'm not gonna use.
- [01:08:22.564]I'll give Elon Musk his due.
- [01:08:24.332]He's somebody who genuinely impresses me.
- [01:08:26.268]If you can honestly go to Puerto Rico
- [01:08:28.304]and rebuild their grid and do it with renewables,
- [01:08:31.372]give the man the job. Fantastic.
- [01:08:34.910](audience clapping)
- [01:08:38.881]But if it turns out you're basically somebody
- [01:08:40.582]who's using this as an excuse to bail out a bankrupt
- [01:08:43.051]solar company, shame on you.
- [01:08:47.356]MIKE: How or why do you think race and immigrations
- [01:08:49.457]becomes the lightning rod for populist anger?
- [01:08:51.727]Is it simply a convenient scapegoat?
- [01:08:54.229]BLYTH: I think it's more than that. I think it's easy
- [01:08:55.865]to mobilize against it because it's a definite other.
- [01:08:59.969]So, the United States, the classic one
- [01:09:01.804]and I've lived here 27 years but it's just continued
- [01:09:05.608]to fascinate me. I've lived in Baltimore an incredibly
- [01:09:07.776]divided city. I've lived in Providence which typically
- [01:09:12.548]an undivided, mainly because there aren't any
- [01:09:14.750]African Americans, really.
- [01:09:16.185]The main ones are Portuguese and Italians
- [01:09:17.653]and that's sort of less divisive.
- [01:09:19.787]So there's incredible division in this country
- [01:09:21.756]particularly legacy of slavery et cetera, et cetera.
- [01:09:24.326]And yet this is the number one country for immigration.
- [01:09:27.363]And yet lots of other immigrants come across
- [01:09:29.365]from all over the world and this city itself
- [01:09:31.433]is a big migration center for refugees.
- [01:09:35.770]So on the one hand you've got that
- [01:09:37.506]and the other hand you have this.
- [01:09:39.108]Now every country has a version of this.
- [01:09:40.910]It may not be as deep as the one in the United States
- [01:09:43.045]and the trauma of slavery but for example
- [01:09:45.381]in France you've got the trauma of colonialism.
- [01:09:47.116]So then you have the withdraw from North Africa,
- [01:09:49.718]the legacy of what they call the Pied-Noir
- [01:09:51.787]the ones who had to come back and liquidate everything there
- [01:09:54.390]and come back to France.
- [01:09:55.624]Now they're being followed in by the Arabs
- [01:09:57.359]that they'd left behind. They're the ones
- [01:09:59.094]who are taking the houses from the working classes
- [01:10:00.596]in the public housing.
- [01:10:03.098]So it depends on where you are in the country.
- [01:10:05.734]What the legacy is? How does that get interpreted.
- [01:10:08.070]If you're in an area where you have zero
- [01:10:09.972]contact with immigrants, as I showed you the
- [01:10:13.409]east German slides, you can still be more anti-immigrant
- [01:10:16.045]than people who have contact with immigrants.
- [01:10:18.314]So it's how this is a product of historical narrative,
- [01:10:21.283]a product of personal experience,
- [01:10:23.419]and a product of the deep political culture
- [01:10:25.588]of these countries. But the bottom line is
- [01:10:27.423]economics is always expressed in a cultural frame.
- [01:10:30.593]Only in our models do we imagine something
- [01:10:33.162]called a representative agent that runs through life
- [01:10:35.664]jumping and adjusting to shocks
- [01:10:38.000]and maximizing their utility.
- [01:10:39.902]That's not what real people do.
- [01:10:41.804]Real people have stories and they live their lives
- [01:10:44.173]through those stories
- [01:10:45.541]and sometimes those stories are colored
- [01:10:46.842]by very ugly things.
- [01:10:48.877]And that's just part of life that we have to accept
- [01:10:51.380]and try to improve upon.
- [01:10:53.882]MIKE: Mark, what should baby boomers be doing with their assets?
- [01:10:56.585]BLYTH: Giving them away.
- [01:10:59.455]MIKE: Last question ladies and gentleman.
- [01:11:01.924]Thanks very much Mark. This one's
- [01:11:03.859]what role, this is from our Twitter feed this evening,
- [01:11:06.929]what role does the study of leadership play in how we
- [01:11:09.498]balance government, society, education, and give others
- [01:11:12.401]a fighting chance?
- [01:11:15.337]BLYTH: So, leadership is way more, as I get older
- [01:11:18.207]I realize that leadership is way more important
- [01:11:19.908]than I thought it was when I was younger.
- [01:11:22.211]Because you know, leaders are annoying.
- [01:11:24.313]It's like the person who wants to be class captain.
- [01:11:26.548]Nobody really likes them. You have an election
- [01:11:30.252]'cause you have to. They're annoying
- [01:11:32.921]it gives them something to do.
- [01:11:34.289](audience laughing)
- [01:11:35.424]It's called Washington D.C., right.
- [01:11:36.959]So they all end up there.
- [01:11:39.261]And there's a way in which when you're younger
- [01:11:41.263]particularly
- [01:11:42.398](fart noise)
- [01:11:43.399]leadership, whatever.
- [01:11:44.400]Then as you get older and you start to be in charge
- [01:11:45.734]of things and run things, you recognize the massive
- [01:11:48.170]difference that leadership can make.
- [01:11:51.006]That somebody with an actual clear version
- [01:11:52.741]who can gain the trust of the people around 'em
- [01:11:55.277]can take something that seems utterly bankrupt
- [01:11:57.913]and transform it and how somebody who's a s**tty leader
- [01:12:00.783]who thinks they're good
- [01:12:02.217]can do incredible damage.
- [01:12:05.254]So it's actually really important.
- [01:12:07.756]But when it comes to the big scale questions,
- [01:12:10.225]the big government questions
- [01:12:11.894]I think it's actually less important.
- [01:12:14.863]So one of the students in a earlier chat
- [01:12:16.999]gave me a question and it prompted the following response.
- [01:12:21.036]I think the election of Trump has been good
- [01:12:21.870]for climate change.
- [01:12:25.140]Because it stops the rest of the world waiting around
- [01:12:27.176]for America to solve the problem.
- [01:12:29.812](audience clapping)
- [01:12:31.714]So if the Germans and the Chinese now get together
- [01:12:33.615]and do green tech bring it to scale
- [01:12:36.585]China for example has installed more solar in the
- [01:12:39.154]past three years than the United States has.
- [01:12:41.757]If they end up doing that, we're the suckers
- [01:12:43.992]because we should've been leading the investment.
- [01:12:45.894]We'll be buying it from them.
- [01:12:47.963]But in a way, that forces them to do that
- [01:12:49.798]and that's good in a global sense, go for it.
- [01:12:51.600]So does that mean Trump was a good leader in that regard?
- [01:12:55.237]Well that's a different question, right?
- [01:12:57.339](audience laughing)
- [01:12:58.707]But it can have a positive effect.
- [01:13:00.109]Let's not sum it all up to the one leader,
- [01:13:03.178]the genius, the charisma, whatever that does everything.
- [01:13:05.347]That's not a good way of thinking about it.
- [01:13:06.949]They can make a difference. But the key thing is
- [01:13:09.284]when they've actually got the trust of everybody
- [01:13:11.386]who wants them to lead, that's when societies work better.
- [01:13:16.225]But when you have leaders who are divisive,
- [01:13:18.427]who pit people against each other,
- [01:13:19.728]that never works out for anybody.
- [01:13:22.131]That's the type of populism you want to avoid.
- [01:13:25.534]MIKE: All right. Ladies and gentlemen. Two things.
- [01:13:27.469](audience clapping)
- [01:13:28.604]First I'd like to remind you to mark your calendars
- [01:13:30.005]for the next E.N. Thompson forum. It will feature the
- [01:13:31.807]British National Debate Team as they tackle
- [01:13:34.643]the question is regulation of social media
- [01:13:36.779]necessary to protect democracy?
- [01:13:39.081]It's November 11th at 7 PM here at the Lied Center.
- [01:13:42.818]Secondly, join me in thanking Dr. Mark Blyth.
- [01:13:44.953](audience clapping)
- [01:13:46.021]BLYTH: Thank you all for coming.
- [01:13:47.055](audience clapping continues)
- [01:13:55.264]Oh shush, shush.
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